The notion that somehow an affluent set of Millennials is going to shift the housing market is not happening. What is happening is rather clear; historically low housing inventory is causing prices to inflate in the face of what has been very low new home building. If you want to buy, your options are usually an outdated crap shack that is already at an inflated price or in some new areas, glorified condos where builders are trying to max out every square inch of development where you can smell what your neighbor is cooking. The fact remains the same, over the past decade there has been a dramatic shift of renter household formation (not homeownership). For Millennials, tastes are dramatically different. Sure, you have Taco Tuesday baby boomers glued to Fox, MSBC, or CNN (typical age of viewers is 60+) so many are simply out of touch with the wants of younger Americans. Builders however understand this dynamic and multi-family unit construction has been running briskly for the last few years. Many large cities have now converted into renting majority locations.

Majority Renter Cities Expand

More than 20 large cities are now renting majority cities. This is a big shift and of course goes against the trend that things are back to “normal” in the sense that if you want to own in certain locations you will need to overpay for a crap shack. Low inventory and house humping logic are powerful draws. Many over spend dramatically when they buy. You see this with DINKs – they buy with two incomes but then pop out a kid and suddenly realize that in many overpriced hoods that daycare is expensive if you want to maintain a dual income household. We’re talking $1,200 to $1,800 a month. Forget about feeding an extra mouth or two. Yet they assume today will be like tomorrow. Nothing in their formula accounts for unexpected costs.

Take a look at this list that now shows 22 large cities that have shifted to renting majority areas:

Out of the 22 cities, 7 (33%) are in California. You have places like Stockton, Anaheim, Santa Ana, San Bernardino, San Diego, Sacramento, and Fresno. The cause of course is affordability. The vast majority of people are renting because of lifestyle choice and money.

Many baby boomers assume that their way of life is going to be the way of life for future younger Americans. It is not. Technological change, pensions, job security, and all of these changes of a slower paced life are not congruent with how things are today. The above numbers speak rather clearly. The vast majority of household formation in the last decade came from renter households.

And some places have an incredibly high number of renters:

Of course, Los Angeles makes the list. This is the all hat and no cattle land. There was a report showing that credit card delinquencies are starting to shoot up because people are living on borrowed funds. Low down payment mortgages are back and I’ve had the chance to talk with multiple banks. The housing ATM is creeping back once again. And in some areas, homelessness is a big issue.

It’ll be interesting to see how this impacts future elections. You also are seeing kids growing up that witnessed their families struggle in the midst of the 7,000,000+ foreclosures that happened. Do you think they have a Leave it to Beaver vision of home? No, they witnessed struggles and stress all related to paying the mortgage and it is no surprise that their view on homeownership is more practical. It is telling that the housing cheerleaders like to look at the cold numbers when it is in their favor but then use emotive logic like “but you can paint your walls” or “your kids have a secure place” or “prices are going up for a reason” when justifying owning a home. They forget about opportunity cost, taxes, insurance, maintenance that never goes away, and yes that home prices can go down and dramatically so. In other words, there is a reason why renting household formation has dominated over the past decade.

If the decision was so simple there wouldn’t be an ongoing debate. This is the biggest purchase a family is going to make. And many cities are now renting majority cities so the idea of being an “owner” is lost on them and now that we are in a time of raging populism, it’ll be interesting to see how people feel when they wake up to realize that there is no free lunch when you go into deep debt to pay for life.

518 Responses
to
“Renters Become Majority in More than 20 Major US cities – The Millennials are Not Coming to Save the Market.”

It must be a very depressing existence to live a hopeless life. Even more depressing to put your hope in material possessions which you can have today and lose tomorrow. Or to put your hope in the red politician or the blue politician or the brown politician or the white politician. No wonder we witness an opioid epidemic!

Most people today lost all sense of what is important and valuable in life.

LOL you’re out of touch with reality if you think the issue at hand is just “oh people are placing too much importance on material things” issue.

People no longer have job security, can’t hardly afford to live outside their parents homes anymore, no pensions/benefits, no retirement, etc. etc. etc.

Those are all things that previous post WWII generations could expect to get, and they all have real impacts on the standard of living, yet today’s younger generations are told they’re being greedy or entitled for wanting/expecting the same things.

So yeah they’re going to be kinda angsty about life in general right now to say the least.

TTS, I NEVER knew what job security or pension plan is. I am a boomer who came to US decades ago. I even did not know the language and I did not have a penny. I was raised in poverty and NEVER inherited a dime. I am a self made millionaire. I jumped from one job to another and I never had a pension plan. I created my own cash flows from RE investments purchased as a result of financial discipline, hard work and delayed gratification. You think that was easy? I always had to pay rent since I was 18 and got my first real job.

It was never easy for me even if I am a boomer. I was not raised with a silver spoon. Maybe for others it was easy, but for me it was not till later in life after I lived below my means for decades. Some millennials have what it takes (the grit), but most don’t.

I agree that at the present point in the cycle everything is a bubble, but always bubbles come and bubbles pop. What we have at the present time is a FED induced aberration. I always spoke against that on this blog and everyone reading my comments can confirm it. At the present time we have 2 powerful forces to create that type of high multiplier for house prices: actions of the FED and actions of the politicians. All the Democrats and RINOs (democrats with an R after their names) are responsible for this through unchecked immigration. I also spoke plenty against that.

“TTS, I NEVER knew what job security or pension plan is. I am a boomer who came to US decades ago.”
I don’t care. No one else does either.

Your personal life story about stuff that happened in a different economic environment decades ago isn’t relevant in any way shape or form to what is happening now today in this economic environment to people in general nationwide.

The harsh reality today that you have to address is that while the non-rich in general are getting poorer nationwide those that are young are getting even poorer faster than older generations. And these “young” people are now getting to be in their early or mid 30’s, when they should be seeing their income and wealth rise, and will all too soon be in their early or mid 40’s and what then?

Your ability to retrain and increase your income is dramatically reduced by that age. A few might make it OK but if everyone else is getting screwed it won’t matter.

“I agree that at the present point in the cycle everything is a bubble, but always bubbles come and bubbles pop.”
Bubbles similar in magnitude to what was seen during the GFC or GD aren’t at all common though and when they do pop they tend to cause prolonged and dramatic consequences for society.

“What we have at the present time is a FED induced aberration.”
Nope. The FED doesn’t dictate what the banks, builders, or local city planning commissions do. This whole problem is much more complex than you’re presenting.

“All the Democrats and RINOs (democrats with an R after their names) are responsible for this through unchecked immigration. I also spoke plenty against that.”
Immigration isn’t a issue. Illegals taking sub-minimum wage jobs aren’t a net negative on the economy either.

The problem is a lack of well paying blue collar jobs along with stagnating or declining wages, gig economy jobs as replacements, no benefits, no pensions, etc. etc. etc. Those are the problems. Anything else is BS.

While you raise some valid points, you can not get what you want if you do not address the points I’m raising. Here they are:

“The FED doesn’t dictate what the banks, builders, or local city planning commissions do. This whole problem is much more complex than you’re presenting.” While I agree that the system is far more complex, I was addressing the main drivers. Many of the other ones, if you think hard enough, step by step, lead to the same root. I was trying to be brief. For a more detailed explanation, please read “The creature from Jeckill Island”. The effect of the FED decisions are very powerful, regardless of the city or who occupies the Commissioner seat.

“Immigration isn’t a issue. Illegals taking sub-minimum wage jobs aren’t a net negative on the economy either.” You are wrong on this one for more than one reason. By living many of them in crammed quarters, they can sustain high rents. High rents mean high RE prices because of higher ROI. That means higher property taxes. You can not have a social safety net with open borders. It is a mathematical impossibility. You have to chose one or the other. You can not have higher blue collar wages with open borders. You can not have high paying tech jobs with a constant influx of H1 Visas. You can deny what I am saying but you can not eliminate the effects on those people. In the end, it does not matter if you make $1000/mo or $10,000/mo. What matters is the purchasing power after all the taxes. High rents and RE prices because of congestion raises the cost of living for the blue collars workers till they descend into poverty in terms of purchasing power. In Zimbabwe, everyone is a billionaire with a very low standard of living because of low purchasing power (it is an extreme case offered to you so you can understand my point).

“The problem is a lack of well paying blue collar jobs along with stagnating or declining wages, gig economy jobs as replacements, no benefits, no pensions, etc. etc. etc. Those are the problems. Anything else is BS.” The wages are not declining nominally. The purchasing power declines because of open borders and low interest environment which pushes all prices to stratosphere. Please see my comments in the paragraph above. You can NOT have any of the benefits you mentioned while the interest is low and the borders are opened. These 2 factors enrich the richest of the richest and decrease the standard of living for everyone else. The inequality did not increase in the last decade in a vacuum. The 2 factors I mentioned are the MAIN drivers (not the only ones). Open borders are part of the globalization which decimates the middle class and enrich the biggest corporations. I am a beneficiary of this process because I understand what is at play; however, that does not change the objective truth of what I am saying.

You can not have good paying blue collar jobs and globalization at the same time. You can not have good pensions and globalization at the same time. You can not have unions and globalization at the same time (except government unions). I have an MBA and decades of experience in running a business. I am not talking only based on theory but experience, too. You can not have the blue collar workers compete for a house in an environment where trillions of dollars move at light speed across borders with no restriction – trillions created with a push of a button by central banks across the world and exchanged for hard assets and real labor by real people. You are on a treadmill for the FED. Repeat after me: dollars (or any fiat) are not wealth and they are not money – they are currencies (they don’t hold value, they are just a medium of exchange). They are just units of measurement for real wealth – PM or RE.

Why do you think wages have been declining in construction, landscaping, and other skilled trades?

And while illegal Central American immigrants are pushing down wages in those above jobs, “legal” H1-B1 Indian immigrants are pushing down wages in high tech jobs. Not to mention job outsourcing to India, which furthers declining wages and a gig economy in the U.S.

Then there’s all the outsourcing of manufacturing to China and Mexico.

I’m not a boomer. I have relatively good job security (not an at-will employee), I get a pension and my employer contributes enough money (with no money on my part) to more than max out my 401K (excess deposited on Jan 1), full medical coverage for the family, short/long term disability, life insurance, etc. And there are thousands of us.

“if you do not address the points I’m raising.”
You’re mostly just restating and rephrasing everything you said earlier so I’ve pretty much addressed your points.

If you want to rebut what I’m saying you have to come up with something better than “here is everything I said earlier but in a more wordy fashion” or even just a good ol’ “nuh uh”.

A few things you’re saying that are new stand out as particularly ridiculous though:

“please read “The creature from Jeckill Island”.”
LOL that book was written by a far Right conspiracy monger who is also a Chemtrail believer and denies the existence of AIDS/HIV and somehow thinks its caused by various medicines. Actual economists, or even just historians, who know what they’re talking about regularly crap on that guy for a reason.

If you’re using guys like that as primary sources of information no wonder your thinking is so screwed up.

“By living many of them in crammed quarters, they can sustain high rents. High rents mean high RE prices because of higher ROI.”
HAHAHAHA you’re gonna blame higher rents on illegals?!?

You realize that rents went up along with the bubble prices because of the mortgage costs associated with the higher RE prices right? Or do you not think the mortgage on RE factors into the rent costs?? Especially in scummy ghetto hovels that most illegals would rent for $600-800 a pop. Those weren’t a major driver of rental price increases at all. Not when you had condo conversions of crappy 1br1ba apartments being put on the price for several hundred thousand dollars a pop.

“You can not have high paying tech jobs with a constant influx of H1 Visas.”
Yet we did exactly that for decades. If the economy grows at a reasonable rate and there isn’t insane levels of wealth inequality its totally doable to have a relatively high intake of immigrants and still have a high wages that go up with inflation.

“The wages are not declining nominally.”
LOL who the hell looks at nominal wages only?! That is deceptive if not outright dishonest to do!! In real terms wages are indeed declining. Once you factor in loss of benefits and pensions the situation is even worse.

“You can not have good paying blue collar jobs and globalization at the same time.”
Sure you can. Just fix the wealth inequality via redistributive taxation and do Medicare For All to get healthcare costs under control while also improving state college funding to get tuition costs under control.

None of this is impossible to do and all of it makes sense in terms of numbers. The problem with implementing it is the political will isn’t there to make it happen. Yet.

“I’m not a boomer. I have relatively good job security…………. And there are thousands of us.”
HAHAHAHA omg you don’t even vaguely understand the scale of the problem!! You’re effectively a outlier and don’t even know it!!

That there are thousands of people like you is EXACTLY the problem. There should be 10’s of millions more, not thousands of people, just like back in your parents and grandparents day with the same benefits.

That is how you get a strong healthy middle class. And no, in a nation of 100’s of millions, a few thousand, or few 10’s of thousands or even 100’s of thousands with good job security, income, benefits, etc. isn’t an example of a strong middle class.

It could definitely be considered an example of a drastically shrunken one from where it was 3-4 decades ago though.

Life is so much better than before. Yes, more expensive, but so much more good food, entertainment options, etc…
Yeah, real estate is more expensive, but it’s not all about owning real estate. in fact, I think, RE as a financial asset is on of the biggest mind-blockers out there

More things available for sale means nothing if you don’t have the money to buy those things and can’t even afford to move out of your parents home or get a steady job due to the gig economy while being loaded with debt from school.

There is more quantity of food available but the quality is lower than in the past. Crappy factory farmed meat, flavorless veggies flown in from far away, tons of chemicals and preservatives in food…..

For entertainment yes for the most part. Exception is theme parks which are way more expensive relative to income than in the past.

Sounds to me that maybe you would really benefit from moving out of Cali. Some place like Huntsville, AL…lots of good-paying (almost as much as here LA) and houses are around $150k for a very nice neighborhood house that is normal size and has a real back yard (Madison, AL). Maybe it would be great for you.

I already moved out of CA several years ago at the bottom of the bust. And I went to a state that had much cheaper housing at the time and bought.

But guess what?

The same house I bought years ago for good price has now gotten so expensive that if I was to try and buy in the same are now I couldn’t afford it. The paper home value has more than doubled and is well on its way to tripling!!

And I don’t live anywhere near one of the “high end” areas either. Nor do I live in a ideal location. Nor are the schools all that great (schools here are in fact some of the worst in the nation) and the house builder is one who is known for cutting corners too!

Meanwhile wages have hardly budged in the area over this whole time and most of the locals can’t buy anything, its all out of staters from CA who are buying and driving up the prices, and they’re pissed about it. Most of them have been forced to rent at near CA rental prices and with their wages it means they’re broker than they’ve ever been in recent living memory. For most it feels like a recession here.

Only people moving in from out of state are doing well and only because they sold in CA or some other expensive area first for heaps of cash and are essentially retiring when they move here.

The whole situation is quite grim and its the new “normal” for all the surrounding states too. If you’re young and you’re trying to play the “grass is greener” game right now you’d be playing a loser’s game.

There is very simple explanation for the rise of % of renters.
Population grows, in dense cities (or cities with limited geography) the way to add more housing is higher density condos. Actual number of owners does not change, but as demand grows it is filled by high-density rentals.

So, in general:
# of houses stays flat and prices increase
# of high density housing (condos) increase to accommodate housing demand -> but this is mostly rental market.

No there isn’t enough condo growth either. Building in general for any type of structure hasn’t been all the high since the pop in late 2006.

The “growth” you’re seeing is in people living with 2-3 room mates to afford to rent and still have a car or pay down school debt. Or they still live with their parents and pay a rent to help mom n’ pop with the bills.

“I wonder if all this desperation will cause a spike in suicides. With no hope for the future what’s the point of living?”

Your average Joe can still live a pretty good life in 90% of this country. Nobody is forcing anybody to live in uber expensive areas where the majority are renters. Certain areas (like desirable coastal CA) are forever changed. The middle class will not be making a resurgence here. I don’t like it, but those are the cold, hard facts.

As someone who lives in one of the lower cost areas the economy is pretty crap here too and there is no sign of a resurgence of a middle class here or any other lower cost (aka low income) area in the US either.

Pretty much everyone nationwide is getting poorer. Well, except for the rich. But then the rich are getting pretty much all the GDP growth funneled towards them for nearly a decade now so what else can you expect?

Just because a bunch of people want to live on top of one another getting high off of sniffing each others’ farts doesn’t make the area objectively desirable. A lot of people also find cocaine and hookers highly desirable.

Why would somebody kill themselves because they must rent instead of owning? They must have barren, materialistic lives. Maybe the world is better off without people like them. It would improve the gene pool if they don’t replicate before snuffing themselves.

How are millennials supposed to “save the market” when the boomers have already milked the market through hyper-industrializing housing and making it an international market, allowing them to fatten their greedy pockets?

Remember folks, baby boomers:
* Had it better than any generation in history
* Were raised on home-cooked meals
* Mom stayed home and gave them attention
* College was cheap. A fraction of what we pay
* A degree (in anything) would land you a good job
* Corporations kept you for decades
* Stock portfolios and homes increased 4x in value
* Retirement was a human right

The boomers were just opportunity seekers like all people in all generations. All people are equal selfish. No generation has a monopoly on it.

The politics were driven by the banks and the politicians catering to them. I am talking about the largest banks who own the FED not the small regional banks – those just struggle to survive in an environment created by the big banks and for the big banks which hate competition.

“Paid illegal immigrants to tend to their homes, left immigration entirely unchecked” When Trump tried to enforce the EXISTING laws all the left media and politicians screamed bloody murder. All the liberal judges made it a point to frustrate Trump immigration policy at every turn. He was portrayed by liberal media as the second Hitler for trying to enforced the laws passed by democrats and republicans alike for decades. Really, why do we have laws if we are not supposed to implement them???!!!!….A country which does not enforce the laws is a banana republic.

Now a liberal on this site is trying to accuse the boomers for voting in a president who “tries” to enforce the immigration laws. Most millennials voted for Bernie Sanders, another globalist/collectivist who wants to continue the same immigration policy like Obama and Clinton who decimated the middle class. The globalization and unrestricted immigration are the main drivers of inequality by benefitting the richest and decimating the wages and employment of the middle class. During Obama, the inequality increased the most and that is a FACT (as to why, that is another subject). All the liberal politicians who do virtue signaling are as big offenders as the republicans when it comes for paying out of their own pocket for nannies and gardeners. They care less if they are illegals.

So, back to school Panders! You have to learn some real history, economics and human behavior.

1. I’m not a liberal. Not even close.
2. I’m not poorly educated, although your post indicates you’re projecting there.
3. You only attacked one of my points, and even though you typed up a short essay you failed to refute even that single point.

The 1965 Hart-Cellar act marks what many might consider the beginning of the purposeful replacement of actual Americans. Ever since then there’s been an endless attack on the family unit, a mass broadening of the the welfare state and social “safety nets”, along with astronomical rates of inwards immigration. Throughout all of it, the boomers have been sitting idly by, doing nothing to help anyone except themselves. As long as they could watch their Johnny Carson at night, enjoy their cheap housing and cheap Chinese goods, and their 401ks kept growing, they didn’t care.

They NEVER, EVER held politician’s feet to the fire when it came to immigration. Reagan’s amnesty turned California blue overnight, and still they did nothing. Colorado, Nevada, and New Mexico went blue. Still nothing.

When immigration turns Arizona, Georgia, Florida, and yes, TEXAS into blue states, all of which will absolutely happen in the next 8-15 years due to LEGAL immigration, people will REALLY start waking up to the betrayal of the selfish generation.

Nope, I don’t buy that at all. The selfish stealing is unique feature (of those still living, of course) of post-WW2-generation, at least in US and Europe.

Very big, relatively poor families where you had to grab whatever you found first teached to these people that if you share, you won’t get anything. These people never learned to share unless forced. Or not take more than they need.

Ideology which is pure greed by modern standards and a in a family with 1 or two kids, totally absurd. Different times, different people.

We can blame their parents but that’s kind of moot point: People are a product of the society which raised them and parents don’t have much influence to that.

Applies to every generation, of course.

Young people cope with much less as they have to. But they’ll learn how to do that, a skill the older generation didn’t ever even try to learn. Not then, even less now.

I mean a McMansion for 2 people? Why the heck? Totally incomprehensible to me and I’m a middle-aged guy.

Barnie Panders: The 1965 Hart-Cellar act marks what many might consider the beginning of the purposeful replacement of actual Americans. Ever since then … yada yada … boomers have been sitting idly by, doing nothing … They NEVER, EVER held politician’s feet to the fire when it came to immigration. …

In 1965, Boomers ranged in age from 1 to 20. I was 4. What were we supposed to do?

Clinton was the first Boomer president. It takes a while to rise in political power. Boomers didn’t get to the top in large numbers until the 1990s. Even then, there were plenty of Greatest Generation still in power.

And it’s not like I see a groundswell of Xer or Millennial politicians calling for an end to immigration. Almost every public figure, of every generation, is afraid of being called a racist.

Panders, I did not want to go line by line through all the non-sense you put there because I have better uses of my time. The reason was not that you posted something so intelligent that I can not refute.

I mentioned the immigration because of all the commotion the liberal created when Trump was mentioning the obvious (he was not PC). Immigration is a very important driver of low wages, high rents and high RE prices. Nobody can deny that. Not the ONLY driver, but an important one.

I put the immigration blame on both, democrats and RINOs (democrats with R after their name.). While you “claim” you are not a liberal, you talk and attack like a liberal, using feelings and no logic. If you walk like a duck and quack like a duck, you are a duck. It is the same with the RINOs who “claim” they are republicans but they always vote like a democrat (i.e. McCain and his Flake fellow).

You have summarized it well. I was born in 1946 and by the late 70’s was watching the naive realism of fellow boomers shift to materialistic values as distorted or worse than that of the generation that raised us. I did not, however, find it at all easy, highly competitive, favoring the already privileged, with lots of challenges (rapid CPI inflation in the 70’s, recessions, huge housing inflation over decades, etc.). The median boomer 65 and up has an annual income around $25k and a net worth, if they own a home, around $125k, not a screaming success. I had two prior prior professions, both requiring advanced degrees, worked constantly and very hard, and at 41 finally moved into something that took me into the top 1% by about age 60 almost 20 years later. It was not easy and I had to continually learn. The millennials face an even more challenging environment but it wasn’t at all easy for those of us who started from scratch as boomers and it can be done and some millennials will.

> The median boomer 65 and up has an annual income around $25k and a net worth, if they own a home, around $125k,

I’m a tail end boomer. My impression, boomers as a group are anti-social and have poor impulse control. If you want proof look at the rise and decline of murder and rape from 1950 to present. Rates of rape and murder have declined[1] for every age bracket since 1990. However the rates for over 60 is still going up.

Short explanation about the low incomes and savings of most boomers, what do you expect. They just didn’t sell out their kids economically and politically, they sold out themselves.

[1] The rate of rape per 100,000 is down 75% from 1970. It was highest when baby boomer men were in their late teens and twenties.

You described your little subjective fantasyland world view, try reality. Boomers worked hard and saved equally harder. No free rides were given. You sound like a snowflake that has a root of bitterness , lose it. Otherwise your cognitive bias will blind you from truth. Furthermore , don’t believe everything you read.

Klaus,
Utter BS. Back when boomers were our age the avg house did not cost 10 times the household income. Tuition was free in California. You could afford a house with one income. Boomers lived large and deferred the payments to their offspring.

There was gold lying everywhere when boomers were in peak job years. Tons of money, pensions, new verticals, technology, consumership, media etc.

There can be no comparison of today vs the 60’s-2004. Everything is different, housing is now gamed by PE, hedge and investment reit leveraging. In the 70’s, if you stashed some of your cash in 18% cd’s you would be loaded. Try that in negative yields for 10 years straight. I’m a late boomer and would never make that comparison.

Underwriting even in the 80-90’s when i was buying paper was built on a good yield vs risk plus volume and loan to value. aka down payment. The world is quite different. I think I’ll now go back and watch the cup on my mobile phone.

Baby boomers filled up most of the metro areas, where the jobs are, leaving little room for those coming later. Hart-Celler (1965) opened the gates to millions. Population, population, population – drives everything. And, in the last 40 years, immigration has driven population. What did you expect to happen?

As a boomer I have to agree we had it great. And along with advances in modern medicine we are still going to be around for a while.

BUT …

At some point we will stop breathing. The interesting number for our children is that cumulatively Millenials will stand to inherit an astonishing $1 TRILLION – or more – each year for the next 40 some years.

We’re leaving the scene and letting our kids clean up after us. Not surprising really. Our parents, the Greatest Generation, cleaned up our messes when we were kids.

We’re leaving the scene and letting our kids clean up after us. Not surprising really. Our parents, the Greatest Generation, cleaned up our messes when we were kids.

Ah, the so-called “Greatest Generation” was in power when much of this mess was created. Johnson’s Great Society and Vietnam War did much to lead us on the road to deficit spending and a big national debt.

Bush 1 (Greatest Generation) had a golden opportunity to shut down the expensive American Empire after the end of Communism. (Remember the promised Peace Dividend that never materialized?) Instead, Bush sparked a new crusade against Israel’s enemies by announcing a New World Order, begun with the Gulf War. (The U.S. lured Saddam into attacking Kuwait, or as everyone forgotten?)

Yes, Clinton, Bush 2, Obama, Trump (all Boomers) continued the profligate military and social spending of the Greatest/Silent generations. But “we didn’t start the fire,” as Springsteen put it.

The boomers took what was offered to them. Would anyone here turn down a coastal home priced at two or three times their income? Would you turn down a pension? Or the ability to live comfortably with one blue collar income?

“But I would feel like I’m taking advantage of the people born two generations from now, who may or may not have it harder than me.”

Riiight. Just like modern metro firefighters are refusing to accept their outrageous retirement benefits.

And naturally the average boomer should have known what a disaster plastic would turn out to be, and fought to stop it. In the 1960’s.

It’s nice to see posters call out these selfish boomers. You can write all day about them (and still not be done) how they screwed everything up just to benefit themselves. Just take prop13. Boomers love it because it benefits them greatly. They pay next to nothing in property taxes and own million dollar homes. If a millennial buys an overpriced condo next door he has to pay ten times more in property taxes on top of the inflated condo price. Boomers will scream at you “poor grandma “ when you call out this scam. Prop13 is designed to benefit these old farts and screw younger generation by transferring the tax burden entirely to them.

1. Interest rate kept low for the longest time in the history of US. It was determined by the FED, owned by private banks. Therefore, the cause were the bank policies. It helped the banks to increase their asset values – most RE titles are held by the banks and they are assets for the banks.

2. The cities policies for development and increasing the soft cost for developers were heavily influenced by banks to decrease supply and make their assets safer.

3. Those in charge of national and state building codes were strongly influenced by banking lobby groups in order to increase the cost of construction and implicitly decrease supply. That in turn increases the value of the bank assets.

The financial sector these days control almost half of the economy.

Above I stated generalities. Let me give you specific examples. The national electrical code and especially in WA state changed so much that almost doubled the cost of the same electric comparative to few years ago (assuming the labor and materials stay the same). Most of the change does not have anything to do with safety but it is politics driven. Add to that the higher cost for skilled labor and higher cost for materials and the cost of just electric work more than tripled. Try applying that to soft cost (permits and fees and cost of compliance), framing, HVAC and plumbing and you get the picture.

For more evidence, look at CA requiring builders to have sprinkler system in the ceiling, solar panels on the roofs, etc. All drive building costs higher and higher while globalization and immigration keep wages almost the same.

Surge, I’m not against safety. I’m against lack of common sense. Most of the building regulations passed before 2008, were common sense laws. What came after were pure BS driven by politics alone. I talked to those in the field and they told me the same thing. I talked to the fire marshal for the county (and chief inspector) and he agreed with that.

Just because some laws and regulations are good it does not mean more of them are better. Actually it becomes worse. For everything there is a sweet spot of balance. It is the same thing like with eating- not enough you die, too much you still die.

Flyover, what you are saying is sensible except the fact that in this forum i have not heard a praise for a SINGLE current new regulation. Is like we have reached optimal stage of regulations and no further evolution is possible.

In the Bay Area we keep the undesirables out with building codes, unlike the land of the Philistines, SoCal that turns into northern Mexico. The new federal income tax law encourages renting. A family can get close to a 24k standard deduction, so it does not make sense to buy. Also, the state income and property tax deduction is limited as well as the interest deduction. The Dems are stupid to complain. Within the next 12 months, people will wake up to this. Watch home prices go down. Raising interest rates also encourages renting. I am a landlord in The City, so I view all of this as good for me. It is good to be rich.

true dat…….BUT the very very best part of all that is when the shit hits the fan ya’ll get bailed out as well!!! Heads you win tails the rest of us lose. But I agree, it must be great to be in “the club”

Taxation and regulation will increase until it reaches levels now seen in Europe. That is how they intend to strangle us, just as they have Europe, with high income taxes, value added taxes, and regulation of everyone except insiders. Our industrial sector migrated to the second and third worlds, where taxes, regulation, and labor costs are low, to bring about the great socialist leveling. Just look at Europe; it is not capable of recovery. Their citizens are simply taxed to death. It’s all about control, and that is what government is all about. Taxation and regulation sap incentive, and that is how countries and economies fail. There will be no end to government regulations and interference. Even under Trump.

Millennials are also not forming families leading to a precipitous drop in demographics all while mass immigration brings in people to replace them.

As we can see in California the future of America is hispanic. It will resemble Mexico by the end of this century and the hispanics will not be clinging to the institutions, heritage and history of the gringo. The remaining whites will live as the white Mexicans live in gated communities in a corrupt and impoverished nation.

It’s already over for the USA because demographics is destiny. You just don’t know it yet.

Over the next several decades I think California will be like the Blade Runner world. I doubt it will be all hispanic. I think the Asian populations and other counties will likely start filling the gaps as well.

Israel gets a pass when it shoots Palestinians trying to cross its border illegally. Then we hear “Israel is a sovereign state” and “Israel has a right to defend itself,” etc. The U.S. establishment gives Israel a routine slap on the wrist, then it’s back to celebrating the embassy opening in Jerusalem.

I wish the U.S. media, academia, and political establishment defended their own country (the U.S.) the way they defend Israel.

America has the best Congress and politicians that money can buy. Any group with enough money can buy their foreign or domestic policy, for that matter. As old Jesse Unruh(California politician) said, “money is the mother’s milk of politics.” It just so happens that old Sheldon Adelson has billions and with that comes influence(power). Everybody wants to be his bff. Some say that Israel has an Alt Right government like America.

We were living off stolen land anyway. We could always go back to Europe. If I see someone that doesn’t look like me, I run home as fast I can, get some vaseline, and watch Birth of Nation until I relax.

Regardless of who “owned” the continent of North America it was built by European settlers. If it had been left to American Indians it would still be savage brutality, teepees, peace pipes and tomahawks.

You did not seriously compare stone age hunters discovering new land to a civilized Europe conquering by killing, raping, and bringing disease? If you want to play the go back game, every human derived from Africa, so Africans own America then. The natives may have been living in teepees but they would have been happier, less fat, not addicted to objects and desire, take out their insecurities on others, and not brainwash others in a false sense of loyalty.

Mortgage rates are now the highest since 2013 but I have yet to see a significant impact on prices. The increase has come at peak selling season so we’ll have fast market data. If values hold then Millenial has made quite a large mistake in putting off buying as now he has to contend with higher prices and higher rates, like what I said could happen to him.

I guess he can sit and pontificate in his rental on what the market COULD do while I enjoy my 3.25% mortgage and home I bought in 2014 with prop 13 taxes.

“Mortgage rates are now the highest since 2013 but I have yet to see a significant impact on prices. ”

The rates are not much higher at this point than they were at the bottom last year, and still affordable to many buyers. What’s happening now is that buyers are making a last-ditch frenzied effort to lock in before rates go any higher. This happened in Alameda, CA (where I lived at the time) right after the market there peaked in the spring of 2005. Before the end of that year, we had some record-shattering prices for a brief spurt of less than a month, and then the slide started down again and never stopped. The record-breaking sales in my neighborhood amounted to maybe 3 houses, not much, but the selling prices were quite a bit above the previous highs (+$50-100K) for the models in question.

What’s happening in Sonoma County, my current residential area, is that prices in my range of $700-$800K are down approximately $50K in the last 3 months, for similar properties. I agree with Ira, above, that house prices are now headed downward due to the new tax laws. Add to that, of course, interest rates going up. I figure that prices will continue to go down for 3-4 years. Unfortunately, my sweetie is pushing me to buy a house with him ASAP, threatening to buy one by himself if I don’t go along. I may just let him. Buying right now is stupid, in my opinion. He’s starting to see prices go down as well, so he’s not pushing quite as hard. He was one of the ‘gotta buy now before it’s too late’ ones, but the price reductions happening now are more than making up for the rise in rates. We’ll see.

Karin, I totally agree. Price will lag a good 6month to 1year for the tax change and mortgage rates to be fully baked in. I live in a NYC suburb and wife has been pushing me to buy for the last 3 years. Very low inventory in the exburbs last 2 years and all of a sudden, in the last 3 months, there’s almost an 100% increase in listings. People are slowly waking up, but mostly are still way over priced at $1M++. Not a lot of demand in that price range. its just a matter of time before price meets reality. Most are already dropping $50-100k on the price. We should see some nice price drops next spring. It takes a lot of patience.

Correction will happen of course, but with higher interest rates you might be roughly in the same spot as with higher prices/lower rate. Quite a moot point if buying mortgage and for a long term.
Also, I do not see correction being more than 10%-20% (and who knows when it starts). Homeowners have little incentive to sell (losing lower rate, transaction cost, etc…) for a dubious upgrade. Investors might pull a trigger, but rents are quite high and there are few alternatives to invest now…remember, the moment you sell you lose 5% in transnational cost AND opportunity cost of cash sitting in the bank. Stocks are very risky now.

What I do not know is how leveraged up people are…from my mortgage process, there is a LOT of scrutiny even on very good financial situation and I assume this is the same for cash-out refis..but this could be a trigger point for “forced” selling if they cannot meet obligation

Reality is housing costs (cost or rent) is unlikely to decrease for SFR and high quality areas. Even if prices drift down, higher rates will drive monthly cost up. Housing “shortage” can be addressed by higher density constructions, but SFRs inventory will not grow much.

So, 2 bigs questions:
1) Behavior of investors
2) How leveraged people are in general.

In summary, pulling cash out or leveraging your existing property is not like it used to be as most of the mortgage programs require 10-20% equity remaining AFTER all the cash out, fees, etc……..

VA is the only exception which allows up to 100% of the value of the property. For whatever reason, VA loans have a relatively low default rate (baked in discipline?) and therefore VA hasn’t changed or cut back this guideline.

This is not the old wild west days circa 2006 where one could pull up to 125% of the value of their property without proving income. Rates are also higher on these cash out refi’s (in the 5’s); so with more restrictions and higher rates the money is not cheap or easy.

In any case, just thought I would shed some light on the cash out issue.

“Mortgage rates are now the highest since 2013 but I have yet to see a significant impact on prices”

Amount of sales first, prices later. We already do see the amount of sales and granted mortgages dropping to smallest in a decade . Eventually it drops so low that only those who must sell, will sell. If there are enough of them, prices will start to drop.

Are there? That’s a question I can’t answer, at least now.

But one thing is sure: It will set a trend downwards. Possibly burst the bubble too and then investors are starting to sell.

It’s obvious that it was internal opposition withing party which stopped that, not “left media”. Cheap maids and gardeners would be gone, that costs money.

And Republicans are all about money. Every time.

Wrong. Republican politicians do not support more immigration just because a few of them might save a few bucks on immigrant labor. They do it because they dread being called a racist.

Hell, it’s worse than that. You won’t just be called a racist. You risk violent Antifa demonstrators showing up outside your office and home.

NY lawyer Aaron Schlossberg was hounded for days by the press, just because he complained about women speaking Spanish in a restaurant, and the video went viral on social media. Now the building where he rented office space has evicted him. There’s a petition to disbar him. And leftist demonstrators are harassing him outside his condo: http://gothamist.com/2018/05/21/schlossberg_mariachi_protest.php#photo-1

And don’t forget the Republican Congressman was shot by an anti-Trump leftist.

The left is intolerant and violent toward “thought criminals.” Doxing. Harassing victims at work and at home. Pressuring landlords to evict them. Pressuring employers to fire them.

No, it’s not “about money. Every time.” It’s about personal safety. It’s becoming risky to be a Republican. Risky to oppose open immigration.

The left doesn’t want to just disagree with you they want to destroy you and every aspect of your life if you don’t want to be part of their “group think” I’ve never seen anything like this……….pure hate and pure evil…….think like us or else.

The only silver lining is it’s now so over the top that they are starting to turn on each other……it’s a game of who can be the most virtuous. And the hypocrisy is in over drive. Trump called MS13 killers animals and the left fell all over themselves to label Trump an evil racist….they were comparing him to Hitler…again………but never mind that one of the biggest mouths in that fiasco was Ana Navarro who had this to say about Trump.

Ana Navarro
✔
@ananavarro
Should Donald Trump drop out of the race? Yes. He should drop out of the human race.

He is an animal. Apologies to animals.

5:20 PM – Oct 9, 2016

read that again and again….that is the “moral” left in all it’s glory.

Thomas, the republicans are not a homogeneous group. You have globalists RINOs (they act and vote like the Democrats but they have an “R” after their names) and constitutional conservatives (for limited government). The difference between them is like night and day. Both, Ron Paul and McCain, have “R” after their name but you can not find 2 politicians more different in their world view. One acts like a democrat and the other like a constitutional conservative.

The Democrats are all communists/globalists/collectivists. No hope there.

Given this dynamic, with all the Democrats and RINOs against him, Trump is very limited in what he can do regardless of his views. The Congress is packed with hypocrites and traitors.

Sorry. Trump is different. He is actually doing something for the white lower middle class and white lower class worker whose jobs are being shipped out of the country and whose neighborhoods are being decimated by illegals. Those white lower middle class and white lower class people have no one else to speak up for them. The Democrats want nothing to do with them because they are white. And, the Republicans want nothing to do with them because their interests conflict with corporate interests. But, there are a lot of them and Trump is pounding the pavement for them. Trump is even trying to expand his supporters into the black community who have been given lip service by the Democrats for years. Many in the Democratic and Republican party are really scared. Things are changing. FYI .. my support for Trump varies by the day. But, I can see reality.

Trump hasn’t done anything but hurt the RE market with this awful tax cut for corporations and the wealthy. Why anyone on RE investment discussion board would still support this whore of a administration bought and paid for by Russia and Saudis.

LG, what REAL proof do you have that Trump was paid by the Russians and Saudis? I know that Hillary was paid by the Russians and the uranium deal.

The tax cuts for the small businesses was VERY good. They create more than 3/4 of the jobs in US and they used to pay the highest rate in the world – for real. The very large corporations ALWAYS had loopholes and an army of tax lawyers. I had years when I paid more in corporate taxes than GE and GM combined – that anomaly can not continue because that was the real cronyism everyone was talking about. Those high taxes paid by small businesses suffocated the Main Street economy for years. We experienced a decade of depression and all Obama and Hillary were talking about were more taxes. Not surprised given that it was coming from leeches who never produced anything of value in their lives. They were always leeches on government dole stealing from producers.

Now people like you clamor for another government leech – Bernie – who never produced anything of value in his life – never had a job in the real world.

Has Trump hurt the RE market? So far, the RE market is very strong, so I don’t think you can say that at all. In fact, I do not think you can say he has helped it or hurt it. It will be a while before the data is in.

Another thing. I am getting tired of leftist hate. Trump has done good and he has done bad. In fact, every president has done good and also done bad. That is reality. Trump has many years to go and after his time is done we can rank him. But, I refuse to be cowered by leftist hate and the demand I think the way they want me to.

Trump is doing a lot of good for certain people in this country that were left behind by Republicans and Democrats … like whites without much money. That group of people was neglected by both parties for many years. Trump changed that. Of course, Trump has not been so good for the affirmative action crowd and for wealthy people that do not own a business. Those are the facts.

Personally, my taxes are much higher after 8 years of Obama and several years of Trump. They were both bad for me. However, I am glad to see poor whites getting their representation by government.

Tax cuts for corporations? LOL. Dude stop watching Rachel Maddow it’s frying your brain. 90% of tax payers got a tax cut. And for the 100000000th time corps do NOT PAY ANY TAXES. They only pass the cost to consumers. So when corps get a tax cut, consumers get a tax cut. This has been explain to dullards like you for years and you still don’t get it. You also probably think rent control means lower rents, LOL.

Finally, a post that is on today’s topic from the good Dr. Rent control pops up in cities that wish to be frozen in time. Unless new buildings are exempt, you won’t get many of them. So today’s renters get a stranglehold over their rental unit and hang on for dear life. hey try to leave them to the kids when they die, too. Whether landlords do maintenance would depend on the value of the property and the zealousness of local code enforcers, I guess.

The Boomers are spending their home equity, they will leave their homes to the banks. No, the lazy children who live at home will receive nothing. On top of that, the adult children will inherit debt, such as the national debt. They are a lost generation.

That’s right! Why buy an overpriced crap shack if you inherit nice, big houses anyways? Until then, save money, invest wisely and stay flexible. Is there an easier formula for success than that? The last thing you want to do is buy an overpriced asset and lock up your hard earned money. House prices in California will go down 55-75 during the next crash….there is really only one way here to not screw up. Save and wait for a nice beautiful crash.

Actually the oldest boomers are 72. But even so, that’s still relatively young for today. Today’s oldsters aren’t the oldsters of yesteryear when they’d retire at 65 and croak at 73. People are already living well into their 80s and 90s on a regular basis. As medicine keeps advancing at the spectacular rate it has been for the past 20 years, people living past 100 won’t be a big deal anymore. Plus people generally lead an easier life than any other generation before them. Fewer smokers too. It’s going to take at least 15 years before the oldest boomers start dying off in significant numbers. And then there will be another 15 years after than before the youngest boomers (who are in their mid 50s today) start dying off. So 30 years before your dream comes true. That’s a long time to rent.

Who cares how old or young boomers are? Nobody. The only thing that matters is….have these boomers take care of the houses (upkeep, maintenance)
You don’t want to inherit a crap shack! That’s your retirement!

April 8 OC Register article quotes a Chapman U poll that says 59% of Orange Co residents support rent control. Only SJC currently has any laws ad those are only for mobile homes. 41% of those polled are renters. Santa Ana has petition drive for rent control on November’s ballot.

So few people here vote in municipal elections, that landlords have a lot more clout in most towns. I’ve met Hispanic families who live in nicer areas who own houses in Santa Ana that they rent out. They own there but can’t vote there.

I’m such a real estate junkie that, even though I’m happily settled into a place I love, I am forever cruising the real estate sites, in other cities as well as Chicago, to see what I’m missing. Was surfing the NYC listings when I came across this incredibly low-priced condo on the Upper West Side, which is now almost as expensive as the Upper East Side:

Read the listing- this large 3 bed 1 bath in a beautiful pre-war building sold in 2006 for $1.4, but it is now on offer for $364K, comparable to similar listings in my moderate priced Chicago nabe. What a bargain, huh? But there’s a big catch- the place is rent-controlled, and occupied by a tenant who cannot be evicted and is paying $620 a month rent. That’s less than my HOA & property taxes, and about $500 less than my 1 bed 4 room Chicago condo would rent for. The owner of this unit is effectively a slave, working for a steep and deepening loss. I can’t imagine anyone taking this place as a gift on these terms, but I guess someone or the other will think he knows a way around NYC’s notoriously draconian rent-control laws.

Rent control destroys every market it is applied to. It makes landlords poor, and makes rental housing scarce, and so expensive that only the affluent can afford it.

Fair enough Laura. But I think that story is an outlier and I’d rather slice of both my arms than ever become a landlord in a shithole like NYC.

I wouldn’t worry about rent control for my properties because I impose my own rent control. If I find a good tenant I don’t raise the rent. I have one tenant who is about to re-sign a lease for the 3rd time. Rent will stay what it was in 2016 when she first moved in. If I rented it out fresh, I could get an extra $100/mo easily. But to me that $1200 yearly income isn’t worth the hassle/risk of finding someone new. And by keeping the rent unchanged, I am making my tenant happy and happy tenants are tenants that treat properties well. It’s the Principle of Reciprocity….I do something nice for you, you feel the need to do something nice for me. I keep rent unchanged, you make sure you treat the place nicely and pay the rent on time.

While rent controlled NYC apartments with super low rents locked in, like this one, are rarer than they used to be, this unit is by no means an outlier. There are at this time, 27,000 rent-controlled housing units in NYC, and 1,030,000 rent-stabilized units there.

The two tiers of rental-rate regulation in NYC are Rent-Controlled, applying to units build before 1947, and Rent-Stabilized, applying to those built 1947-1974. Rent-stabilized units are allowed to raise rents in small increments in keeping with inflation, and are subject to income limits. Rent-controlled units, however, can almost never raise rents, and there is no limit on the tenant’s income. Worse, the unit is “grandfathered” for the tenant’s heirs, who can then squat for an ultra low rent until the owner finds a way to evict them, which is almost impossible. Tenants of rent-controlled units, which include many high-end units, tend to be affluent and well-connected- people it’s not safe to mess with. Most rent-controlled buildings were lost either to conversion to co-op, if the building was beautiful and in a good location, or was simply run down until it became uninhabitable and was abandoned. The Bronx neighborhood was by 1980 stuffed with formerly beautiful pre-war buildings in various stages of collapse, left to rot when it became less unprofitable to abandon the place than continue to operate it at a steep loss, and spend your life in housing court for all the code violations for repairs you couldn’t afford to make and the lack of heat, which you couldn’t afford to provide, on the rents collected.

This particular case I posted is interesting because it’s in a condo building. When the building converts to condo or co-op, the tenants usually have to leave, but (I’m only guessing) I suppose the owner wanted to rent it out, and, not knowing the rent control regs, bumbled into this unfortunate situation, and is held hostage by a tenant who is probably very savvy and knows every angle of the regulations & how to game them.

From my perspective, things don’t add up! This article is just more fodder! If the trend is renting, if home ownership is out of reach of 75% of L.A. residents for example, and observation says more and more people are doing mundane jobs for meager pay, exactly where are the future home buyers going to come from? The NAR and ‘house humpers’ need to stop spinning this as though 80% of the population have means, when in fact 80% of the population are barely hanging on paycheck to paycheck! There really is only a small percentage that can afford to buy. I wouldn’t bet the ‘farm’ on low inventory!

Houses don’t need to be bought by owner-occupiers to sell in any market if the profit from renting them is good enough. I hear about really high rents in some SoCal markets, and those markets are the ones with high prices. However, I think that the current prices are high enough to make purchase for rental purposes a rather risky proposition, except in the “Inland Empire”.

It actually adds up perfectly. It’s called limited supply. Those who are already in are holding on for dear life which leaves only a trickle of inventory for those with means who are not in your 80%. Doctor HB actually gets it and that’s why he hasn’t brought real homes of genius back. Instead he now pens articles about Millennials’ reduced purchasing power in the context of rental armageddon.

Only smaller banks and credit unions are covered under this legislation. The number of local banks fell during the Dodd-Frank era, and small state senators of both parties sponsored this bill. The big banks were mad as hell that they got none of the “action”.

The number of small banks that failed during the 2008 downturn was enormous. However, nobody went to jail. The FDIC just bailed out the account holders at our expense and the CEO’s of these banks had been making multi-millions for years with all of their bad management. Nobody went to jail. The CEO’s just walked away into the beautiful CA sunset while we all paid them.

Hey! What could go wrong again by loosening the laws? I’ve seen it all before.

So we should predict that small banks will make irrational loans and keep these housing prices continuously going higher for at least 3 more years as was done before 2008. Property inflation is not over and will continue until a recession and that will not happen until these small banks stop making irrational loans.

Landlord, you will own a house in Spokane….I could buy two houses in Spokane in all cash (if they are 250k) I make over 100k, no debt, over 800 credit score and when the next crypto bull run starts I can call myself a millionaire. Buying a house in flyover country is nothing to brag about. We are talking about California where even a crap shack costs over 1mio. It’s much better to rent in California than to buy until the crash happens. Once the market in California drops by 55-75% buying makes sense again. It’s just a waiting game where buyers lose and renters win. It’s a different world here than in flyover country. You need to understand that you can’t compare Spokane to where we live. It’s like comparing TJ to San Diego or comparing a Mercedes E class to a Toyota Yaris.

Woodard, you will not
Amount if money you will save by renting vs. buying is miniscule.
Lets see:
Lets say you dont buy million dollar home.
You save 200k and maybe 1k a month in “rental parity”
1k advantage will dissapear in 5-7 years

Far cry from millions you are touting. 200k into several million in 15years?

Oh, 30years?
Lets see, your 1mil home today will be 2.6 in 30 years for sure.
Plus after 10 years or less your 1k disadvantage will dissapear.
So, you roughly in the same place (wealthwise)but with much lower living expenses

“Reminds me of that condo complex not far from where I live. 2bd,2b 400k in 06, 240k in 2013 and now 350k in 2018. By 2020 we will see it at 175k (where it should be).”

Holy crap, Millie is showing a glimmer of common sense. It’s not all correct, but hey, baby steps.

We finally we have a clue as to the type of area you live in. Slightly nasty yet still coastal city, so higher than inland values but not desirable either.

Your example doesn’t show the lowest point, which was more like 2008-2009. Based on the 40% drop in 2013, it would probably have been more like a 50% drop in 2009, and because of that, I’m guessing schools are terrible – coastal areas with good schools did not drop anywhere near 50%.

Given the fact that the current market is on more solid footing than the last peak, and that the long term trend is up (a low point in the cycle is almost never as low as previous lows), I can see 30% off if it dropped tomorrow or 40% off if it dropped in 2 years. Of course in 2 years it might be back to $400k or higher.

So I take it that when you looked at an actual property (gasp! A data point!) you realized that a 75% drop from $350k (to $87k) is ludicrous. Not because it’s too big of a drop, but because those condos would be snatched up long before they reached that point. That kind of drop would put inland condos at $50-75k, which a single fast food employee would qualify for, which is virtually everyone 18 or older. There simply aren’t enough properties for that to ever happen.

Anyway, so 40% off $400k is $240k. I can definitely see that happening in two years. It would be right in line with the long term trend – a $200k low followed by a $240k low.

John,
Nice! I knew you come around! Once values drop by 55-75% many will jump on the wagon saying, yeah “I expected that too” or “I agreed with Millie all along”.

There are a few points I want to elaborate on.

In regards to the area, you are on track. I can’t disclosure the exact coordinates otherwise many will move here. 🙂 When I moved out from my in-laws house I wanted to have a much closer commute to the tech company I work for but most importantly I wanted it to be cheap. Otherwise moving out would not have been worth it. Looking at the people renting around me my income (I make six figures) is probably double of what some households bring in. Rents haven’t increased. My tip: rent a cheap apartment from a private landlord and be a good renter. Your landlord will be good to you, keeps your rent at the same price which lets you save a ton of money!
School district, it’s very spotty, depending on the zip code. I am not in school and have no kids so I am thinking/hoping it’s a bad school district. That keeps rents low as well.

“Your example doesn’t show the lowest point, which was more like 2008-2009. Based on the 40% drop in 2013, it would probably have been more like a 50% drop in 2009, and because of that, I’m guessing schools are terrible – coastal areas with good schools did not drop anywhere near 50%.”

That particular condo did not sell in 09. My example is to illustrate the boom and bust cycles in california. There are literally thousands of those examples. However, some here still claim that price doesn’t matter (surge, jt).

“So I take it that when you looked at an actual property (gasp! A data point!) you realized that a 75% drop from $350k (to $87k) is ludicrous.”

A 55% for that condo would be my entry point. Not that I buy an investment property there but it would make financial sense to do so at that discount.

“Anyway, so 40% off $400k is $240k. I can definitely see that happening in two years. It would be right in line with the long term trend – a $200k low followed by a $240k low.”

Very nice! Would be a huge discount already! Jt, surge and other RE cheerleaders must hate it. They have the mind of the avg joe. The avg joe thinks that what goes up keeps going up and what goes down keeps going down. When ripple (xrp) exploded to nearly 3 bucks “they” (the avg joe) were talking ripple at 100dollars in 2018. (Totally neglecting circulating supply and the unrealistic market valuation it would have at that point). I usually adjust my stop loss upwards when a coin explodes and it triggered close to the all time high.
For RE: Same mentality is happening now, a heavily overpriced crap shack marked at 1 mio is seen by these people at 2.6 mio in the future while in reality this will more likely be at less than 500k during the next crash and maybe at 1.2m in 30 years.

When the cryptobubble burst people here (tank in sight, wheelin dealin) were saying bitcoin will soon be zero so “you better sell now” LOL- I started buying back in by averaging down at that point.

Are you hoping people won’t read anything that I wrote, and then think I actually agree with you? A 75% drop is pure fantasy. Will never happen, anywhere. A 55% drop in your area would be an extreme stretch, considering this market is more stable than the last one.

“He’s actually hoping kids in his neighborhood are getting a crappy education, because it benefits him economically.

And then (regarding Prop 13) he pretends to be concerned about fairness and justice.”

Lol!! Nice wording! I am not hoping they get a crappy education…I just couldn’t care less! I did not make these families move here! That was their choice.
The real question to ask is: why would I live in a better school district, pay a higher rent and don’t benefit from being in that better school district.
It had to be worth it moving out from in-laws house or my parents house.
I get a steal in my rent. So it was worth it.

U have a strange way of thinking….this is all very different from prop13. Prop13 is a scam to benefit boomers and screw younger generations. Why would I be okay paying the price to keep your property taxes low? U love government subsidies as long as it only benefits you and someone else pays! Start paying your fair share and you can be part of the discussion. 🙂

John,
I know you are a secret fan of mine. You almost always respond to me! Thank you for your loyalty. As soon as we see the 55-75% RE crash that so many experts expect you will be the first to jump on the wagon! “I never said it wont happen”

A fire-gutted ghetto house won’t sell as-is for a 75% discount. The land alone is worth more.

After the last crash, it was possible to get 60% off a small inland apartment conversion that had been sold at the peak via liar loan with $20k in upgrades. It was also possible to get 60% off an SFR using cash at a foreclusure auction, or literally driving around neighborhoods with pre-qual and deposit check in hand looking for new foreclosure notices on doors, and contacting the lender before it reached the MLS. I looked at one that was thrashed and selling for 60% off peak. That was in Riverside county, where the nominal median drop was 50%. FIFTY. The 60% off deals were few and far between, and they lasted all of a few months before investors ended the party. I bought for 40% off peak in 2009 and was glad to get it. And here you are looking for 75% off near the coast, a completely baseless made-up number, in an area that hasn’t even reached the level of the last peak. It won’t happen, but it’s funny every time you say it.

Now that I think about it, your inability to accept the past or look at current data is probably the reason you won’t say where you live. You know it would take all of 30 seconds to show you exactly how much it dropped.

“The problem with blaming the shutdown on Congressional partisans is that the partisans on either side know exactly what they want. When there are specific things you want, compromise is usually possible.

The public in the middle, however, don’t understand politics, only emotions given to them by TV, and so their beliefs are cobbled together in real time, improvised, as they get “more information.” One trending topic at a time, each vacuum sealed to prevent cross contamination. They don’t look at things historically, culturally, humanistically, or even selfishly, there exists no system for interpreting “the facts.” Compromise becomes impossible, as a simple example, when a “moderate” “thinks” there should be more restrictions on guns, they want gun owners to give up something they want very much– in exchange for nothing. “But it’s the right thing to do!” And the yelling starts, in HD.”

More fairytales. As if buying an overpriced home somehow has anything to do with success. Buying high is just dumb. Buying low is smart. Smart people tend to be successful in their career as well. I bet most smart people wait for a buying opportunity. Look at me. Friggin smart 😀, has cash, no debt and will buy low when market collapses. I will probably buy a beautiful house at a 50% discount.

I finished school in 2008…..you don’t buy a house when you got no cash and no career. (when you are fresh out of college) Now I got cash-lots if it and a 100k job. I can buy now but wait for the next 09. You can ask any young guy why didn’t you buy in 09? Maybe because the guy was 16? Why didn’t I buy in the 80’s ? Cause was just born. Every generations gets the opportunity to profit from bubbles. I made a boatload with crypto. Now, I just have to wait until housing crashes 56-75%. Then I will by a Dream House in all cash. See how it works?

Millennial has been a working adult for less than ten years, last bubble was longer ago than that. Clearly this guy is inexperienced and lacks the perspective of being a productive participant through even one full cycle. Then he goes on and on about a whoopdedoo 100K job as he himself basically admits that amounts to jack shit in California.

Millie, yes, with 100k income and at current prices you should probably avoid buying a dream home now. I would recommend
1) working on increasing your income (at least double)
2) Keep saving
3) You can also consider taming your appetite and go for a start home/condo. You can a great 2bedroom bedroom in excellent neighborhood for 500k which you can easily afford with 100k job and 100k from your crypto.

You can also wait. Prices will correct eventually. 10%-20% and this will be due to large recession, but then again you might be at risk of losing your job then.

Lord b,
“Then he goes on and on about a whoopdedoo 100K job as he himself basically admits that amounts to jack shit in California.”

Speaking of experience…when you talk about income you should also consider the area where you generate that income. In certain areas of California 100k is a starting salaRy. In my area 100k is fantastic! And I continue to brag about it.

Another example, to make it more visual. California is roughly the same size as Germany. If you make 100k in east Germany,you can live like a king. 100k in the south is pretty good but does not get you very far.

Button line, all I have to say is I make over a 100k. I compare that to the median household income in my area and house prices in my area. It’s a fantastic income that lets me save a ton of money. I am proud of myself. Plus, RE cheerleaders think I am poor since I don’t show how much I make. Used Honda, rent cheap apartment, never buy the newest iPhone, etc. yes I am young but wise. .

Surge,
“Millie, yes, with 100k income and at current prices you should probably avoid buying a dream home now. “
For sure!! Once prices drop 55-75% I will buy my dream home.

I would recommend
“1) working on increasing your income (at least double) “
No way! I am already at the level I wanted to be. I like my job. Sure, they want you to always say that you want to get to the next job level but I actually want to stay at my level for a long time. The money is fantastic for what I do and let’s me save a lot each pay period.

“2) Keep saving”
For sure! And invest some of it!

“3) You can also consider taming your appetite and go for a start home/condo. You can a great 2bedroom bedroom in excellent neighborhood for 500k which you can easily afford with 100k job and 100k from your crypto.”
That I don’t follow. I ha e no interest at buying 50% over value. I am going to buy a sfh home when the market crashes. Condos are a very bad investment in California. For a number of reasons.

“You can also wait. Prices will correct eventually. 10%-20% and this will be due to large recession, but then again you might be at risk of losing your job then.”

Hell ya! My educated guess is 55-75% drop. It’s gonna be great. All you need is patience and discipline!

“Median household income has been steadily increasing under Trump, rising from $59,471 in January 2017 to $61,483 last month, according to Sentier Research, which tracks income on a monthly basis using census data. This also means that household income is now higher than it’s been in at least 50 years — after adjusting for inflation.

Gallup’s tracking poll shows that 67% now say it’s a good time to find “a quality job in the U.S.,” which is the highest since Gallup started asking this question 17 years ago. The best this measure ever got under Obama was a paltry 45%. CNN’s poll finds that 57% now say “things are going well in the U.S.,” up from just 49% in February. The latest CBS News/YouGov poll found that 64% rate the economy as somewhat or very good.”

Teachers can no longer afford to live in Davis. Nice read.
Nothing wrong here….for what do we need teachers anyways?
I don’t plan on having kids. Most millennial don’t want kids. This teacher makes 47k and the avg house costs 670k? What’s the problem. As long as boomers enjoy inflated house prices and have low property taxes (thanks to prop13 that only benefits old farts) there is no issue here is there?
We should cut teachers salaries and give it to boomers….because….poor grandma!!

682 K for a home in Davis is completely laughable…..I’m revising move down to 30%….I use to build apartment buildings for less than that in Davis….This is going to be fun…
I would buy in Fair Oaks at that price….too funny

Are these the same clowns who told everybody to load up on gold in 2010 instead of buying RE? As a wise old guy once told me, be extremely wary of people peddling investments that they have a vested interest in. Do your own research and homework and thank me later.

1) Holds its intrinsic value well.
2) In your hands it is a portable form of wealth.
3) Easily bartered.
4) A history of being an accepted currency.
5) Can be held in market tradable ETFs and funds.

Minuses for gold:

1) You may have to pay for storage.
2) By itself it doesn’t pay you anything. No interest.
3) Its value in dollars is partly perceived crisis situations, partly interest rate sensitivity (negative correlation), partly inflation hedge (positive correlation) and partly a play on growth or shrinkage of demand in developing markets. Therefore it has price volatility that you might not be counting on.
4) In a real crisis, robbers (free-lance and governmental) will look for it.

A home bought in 2010 would have increased at LEAST 50% in the past 8 years, and the rate of return would have been MUCH higher since it is highly leveraged. Unlike a gold bar or gold coin, the home provides a basic human need (shelter) and can be rented out to generate income.

Keep buying that gold. Peter Schiff was dead nuts on back in 2005 but 100% wrong the past decade.

The price today is over 4.8 times the price in 2001. Plus, you’re not paying property taxes, maintenance costs, repairs, HOA fees if applicable, etc. while you own it. And when you sell, you don’t pay realtor fees and closing costs. Plus, it’s more liquid. AND, you don’t have to sell it all at once. In fact, if it’s under $10,000, it’s not even reported. With real estate, yes, you do have the $250K per person exclusion, but the new tax law is putting more and more restrictions on the use of that.

When I sold my two houses, I had to put a ton of work into them to get them ready to market. With the first one, I missed listing at the peak because I still had to finish the landscaping, and put in flooring. I had to take three weeks off just to take care of that. I had already spent most of the seven years I owned it painting inside and out, replacing the water heater, light fixtures, rotted siding and window trim, and on and on and on (mind you, it was only 10 years old when I bought it – it was a cookie-cutter development house). With gold, maintenance is zero. All you do is walk down to the coin shop and sell it whenever you want to.

Ok Karin, my turn. First of all, I’m using the numbers and years YOU mentioned for this comparison. Your last comparison was Gold prices between 2001 and 2018 which resulted in an increase of 4.8x. Let’s do the same for CA home prices. I’m using a 900K crap shack which is pretty typical what we see on this blog.

2001 home price: 300K (20% down = 60K)
2018 home price: 900K

Your initial downpayment increased by 10x. Sure you paid property tax, insurance, maintenance, etc. How much did you spent on housing for those 18 years? That needs to be accounted for also. Remember, shelter is a necessity and owning gold is not. The key points here are:

“Are these the same clowns who told everybody to load up on gold in 2010 instead of buying RE?”

2010 was a good year to load up on gold, obviously, as it was nearly 5x higher the following year. Those who bought RE in 2010 saw their investment tank further the following year. Just sayin’. The clowns you mentioned hit it right.

Karin, you misread. For my previous comparison I used your years, 2001 and 2018. Whether 2001 or 2010 relative to today, the returns on CA RE have surpassed gold since RE is highly leveraged. And owning RE serves the purpose of shelter also, which gold does not. There is nothing wrong with owning gold, but owning a primary residence should take precedence. Talk to a financial adviser and see what they say…

Of course, everything depends on timing. I just thought it was funny that you picked the year 2010 to make fun of those ‘clowns who told everybody to load up on gold in 2010 instead of buying RE’. If I’d bought in 2010 and held for a year and a half, I would have been up almost five times. Instead, I bought in 2007 and still have my investment, so I’m only up double. Poor me.

Having said that, I think it’s a good idea to own both RE and gold. Each have their distinct advantages. Although the day I closed on my house in 1998, gold was $286. I would have been better off putting my $$ into gold instead of the house, and would not have been paying tens of thousands every year in property taxes, HOA dues, deferred maintenance costs, and mortgage interest. That on top of the staging and 5% agent fee when it came time to sell. Oh, and lost vacation time when I did my own landscaping, and painted my entire two-story house – inside and out – by myself. And my lost time, that I would so much rather have spent going hiking, hanging out with friends, or reading a book. But I digress.

“If I’d bought in 2010 and held for a year and a half, I would have been up almost five times.”

Wrong, you are mixed up on your numbers. Gold did not go up by a factor of 5 from 2010 to 2011.

I would question any financial adviser who steers their clients into gold before buying a primary residence. Did you not read all comments: shelter is a necessity, RE is highly leveraged, RE provides (or at least did) provide nice tax shelters, buying a place protects from constant rent increases, it can be rented out for income, etc. I’ll stop there, if you want to sink your life savings into gold, go right ahead.

I’m sorry, I didn’t check my earlier numbers. It went up nearly 5x from January 1 2001 to June 6th of 2018 (see previous post). In the approximate year and a half that I mentioned, from January 2010 to September 2011, it went from $1096 to $1897, which is slightly less than double. Still, not bad.

And I never said to buy gold instead of a house (except maybe right after you sold your house at the peak, and decide to wait it out before getting into another property). I think it’s best to own both.

By the way, residential tax breaks have been severely curtailed under the new tax law. I broke down the worst of those changes under the last article, so I won’t repeat them here. But homeowners are going to feel quite a shock to the pocketbook next April 15th. Personally, I think this is going to be good in the long run, because it will bring housing down to a more affordable level. Too many people can’t even begin to hope to buy a house in the U.S. anymore.

Don’t need to read much else to know where this guy gets his fake news, but here goes…

“…mortgage interest is rising at the fastest rate seen in nearly half a century in what has been the most prolonged increase in 46 years.”

Aaaand there’s the fake news. Every part of that sentence is blatantly untrue.

For anyone who cares to confirm (not Millie, of course), historical rate charts are a google away.

And then there’s the fact that interest rates don’t correlate with prices very well, if at all. Yes, a sudden hike can cause prices to drop a little. But put a median housing price chart up against a historical rate chart for the same date range, and you’d be hard pressed to find any pattern whatsoever. I’ve tried.

And of course he had to repeat this zerohedge gem:

“Freddie Mac Launches “3% Down” Mortgage With No Income Restrictions This time there are no geographic restrictions and NO income restrictions.”

Again implying (also known as lying, although the author could have just fallen for the zerohedge article like many did) that minimum income requirements have been eliminated. They haven’t. The actual change is that people with incomes that were too high to qualify for these programs in the past now can.

Most of us know that prices will drop. Maybe even this fall. But making up reasons for it for page views, like this guy, doesn’t help anyone.

“And then there’s the fact that interest rates don’t correlate with prices very well, if at all.”

In economics, they always pick 2 variables and they show the correlation “ALL OTHER THINGS BEING EQUAL”. Well we both know that economics and consumer behavior are very complex and nobody can predict the outcome because of the complexity. In other words, in real life all other things are never equal and everything influences something else. However, looking strictly at interest and prices, there is a inverse correlation and it is obvious that at 12% prices are lower than at 4% if wages and everything else stay the same. I think he was commenting from this point of view.

Zerohedge….LOL. When reading an article and they cite zerohedge I just stop reading right there and realize the author is a fool. That site is full of permabears and articles full of half truths and twisted facts. I mean they’ve been calling doom and gloom since the beginning. Foolishly I started reading them in 2011 and became a Millie always citing zerohedge articles to prove my points that real estate was overpriced and due to crash. Stupid of me to follow such drivel and looking back I can see what a fool I was. Folks, stay away from that site and read more unbiased news to form your opinions.

The thing with ZH is they sprinkle some truth but then take that sprinkle and turn it into a torrential downpour. Yeah mortgage rates have increase by a lot – percentage wise – in the last couple of months. Going from 4% to 4.5% is a 12.5% increase. So yeah that 12.5% increase may well the fastest increase ever for a 2 month period. But we’re still at 4.5% mortgages which historically speaking is insanely low. In the 80s and 90s most people would have given their right arm for a fixed 4.5% 30 year mortgage. Yet the boys at ZH now treat 4.5% as if it’s 20%.

And as far as the income restrictions go….about time!! I’m so sick and tired of all these programs being available only for “the poor”. Screw that. If we’re going to have socialism, let’s have equal socialism for everyone. If someone making $50K gets a 3% down mortgage, then someone making $150K or $500K should have that option as well. Ideally I’d like the govt to get out of housing altogether. Of course that ship sailed long ago. So if we’re going to have govt handing out freebies, let’s have everyone in the country get a cut of the action, not just targeted groups.

RE cheerleaders and realtards are not okay with data or statistics. Any data that shows we are in a massive bubble automatically means perms bear to them. They can only accept news that is sponsored by the NAR and shows false statistics and made up stories. No wonder they hate objective, unbiased news articles by zero hedge. “Housing can only go up”, “but now or be priced out forever”, “inventory is low”, “interest rates will never go up again in our lifetime”. All these lies is what RE cheerleaders want to read and preach. Everything else is being a perma Bear. Pretty funny and entertaining.

ZeroHedge is one of my many news sources because they report in detail on things that mainstream media does not. Having said that, you have to temper the spin and pick out the facts to make up your own mind. Eliminating sources like ZH altogether is folly, and you’re a victim of the exact thing you’re professing against.

If you believe zerohedge was telling the truth about minimum income requirements being eliminated, I think you should call up a Freddie Mac lender, tell them you’re unemployed, and ask for a loan. Let us know how that goes.

Many keep rolling out these arguments that claim renting is cheaper than owning. One of their favorites is rental parity. So the rent. Then, they find out that owners made a killing while they rented. Failed by rental parity. So, what do they do? They decide to continue to rent because of rental parity says renting is smarter. Instead, they should take another look at rental parity because it has failed them. The lesson is rental parity is a flawed concept and that needs to be understood by those relying on it for a housing investment decision.

I agree. Rental parity is a flawed concept, yet people are swearing by it. But nobody really replied to my multiple questions testing its validity and definition:
1) 10/15year mortgage – rental parity is never there
2) Rental parity is different across cash vs. 30 years mortgage, or mortgage types.
3) Treatment of principal in rental calculation.

Somehow people who swear by rental parity do not fully understand what it means and just parroting the idea around. Any approach must be tested and right now my tests are left unanswered.

I believe holding a house for at least 10 years will achieve rental parity and after that, generate enormous ROI.

If you have a 15 year loan, it may delay the ROI for a couple of years, but once you hit 15 years, and you have no more payments, it has an enormous ROI.

Imagine like many boomers who have no mortgage that you are living in a Prop 13 4 bedroom. 2 bath house house with only $300/month for prop taxes and insurance. The neighbor with the same house is paying $4K/month in rent.

The problem with buying at a peak is holding on to the house for 10 years. That was the downfall for many in 2008. They maxed out their expenses and then lost their jobs so they could not afford the house and to hold for 10 years. Many walked away because they were forced to. If they held for 10 years, they would have been fine. For this reason, have 2 years cash to get you through any hard times before you buy.

Too funny how some guys try to pretend that rental parity doesn’t exist.
Dude, why in the world would you buy something (finance it, pay fees on it and interest) if you can get the same exact building for half???? (By renting, flexibility, no liabilities). The lack of Rental parity in this market is proof that this bubble is a joke and will end badly.

Potential buyer,
What you say is true if you have very very short timeframe.
Yes, renting gives flexibility and it can be of a lot of value depending on personal situation.
Obviously, if someone is considering buying it is because there is some degree of stability expected. If you expect to move in year or few years, buying should not be even on the table.

This is why “rental parity” calculation must exclude any principal payment (and include conservative return on downpayment)
It is fundamental accounting principle.
Otherwise buying a home cash does not make sense -> Oh no, first month you have this 500k payment which is 498k more than your monthly rent that you could have gotten

JT, remember to always take your pills before you sit in front of the computer.

The buyers did not make a killing. We had 7 mio foreclosures during the last crash. We might have 10 mio this time. Renters who waiting until the bubble popped and bought low made a killing, yes. Buyers, who buy during the peak suffer from this decision the rest of their life or even lose it all. Buying high is always bad. Waiting and buying low is always good. Renting and saving a ton of money during the bubble is also always good. It’s actually pretty simple to grasp. Just wait, save and buy when House prices are down 55-75%…. you will thank me for it

You keep going on about a peak. When is this peak? Is it right now or later? It’s way past time for you to put up or shut up and make a real claim that we can test now. None of this wait and see shit. Peak is or was on (insert your specific date here).

First John d tells us NOBODY ever said that interest rates will never go up again in our lifetimes, then he said buying the dip is the dumbest thing, now he tells us we did not have 7 mio foreclosures during the last crash.
Man, I am getting concerned about his health status. Is he like JT and forgets to take his pills before going on the internet?

Lord b,
I understand the frustration. Some people don’t have as much time as millennial have. We can sit back, relax, save, travel while boomers get older and hand us down the wealth. Yes during the peak you don’t want to buy. Just write this down: buying high=bad. Waiting for crash=Lottery win.
Just sit back, get the popcorn ready, wait and watch!

“You prove my point again. See, all I have to do it reference what you said and you get all angry about it. Same spiel”

You’re forgetting that the people reading this and our past posts know exactly what I said, and unlike you, can actually comprehend it. Your pretending I said something different only makes you look more infantile.

Just cannot take anything Mille says seriously. He constantly spouts off the same ridiculious statements and has 0 credibility.

Most members here can engage in a rational discussion and bring up valid points b/c housing and RE is a topic with so many moving parts and facets to it; there is no singular “right answer”. All Mille has ever done is shout his predictable line of 55-75% drop with zero evidence or reason for this. Blah blah blah crypto, blah blah blah debt, etc……

He has just been a larger extension of the infamous Jim Taylor line: “housing to tank hard”; however, Jim Taylor has been relatively non-existant the past 18 months. He’ll come on here every now and again to write his line, but, he was a main contributor/poster and now no where to be found. I believe last year he too was waning on his “tanking” theory. Also, haven’t seen Mr. Exotic Lending aka Prince of Heck anywhere lately.

Guess when you are wrong month after month and year after year; you kind of swallow your pride and stay quiet.

Dan,
You can’t fight economic cycles. You, as a lender, will profit from the upcoming crash! Once the market corrects (55-75%) a lot more people will buy! That will help you.
Remember 2006? Everyone and your mom thought prices will never ever go down again! Than 2008 happened! People have been wrong before many times. Just a few month ago people said interest rates will never go up again in our lifetime.

Cost of owning is a broad concept.
Consider buying the same home, same interest rate, but either 15year mortgage or 30year mortgage.
In the former, the payment will be 50% more as compare to latter.
But cost of owning is the same (since interest portion is the same). In fact, cost of owning decreases much more rapidly with 15year MTG since interest component drops much faster.

Someone who cannot understand this, should not be looking at buying real estate at all

15 yr is not twice the payment, but, you are correct in that the financial advantage of paying on a 15 yr loan is great compared to a 30.

You also get a lower rate on a 15yr vs 30yr.

If one can afford a 15yr (which is tough in CA) that’s huge. As soon as I hit 4yrs reserves, which I figure will be end of year I’m either refinancing into 15yr (if rates have dropped) or doubling up my payment.

Can’t imagine my life with a paid off house, that’s enormous. Life changing.

jt, I was pounding the table hard back in 2012 because many properties were below rental parity (with 20% down) that resulted in an absolute no brainer to buy. Due to Prop 13 and mortgage amortization, when buying your payments are essentially fixed for the next 30 years. Renters can’t say that. Due to massive supply/demand imbalances, rent increases steadily upwards. This got many people off the fence, but some people were still blinded by the fog of war from the downturn.

We’ll have another downturn in the future. Many of the people who didn’t previously buy will either not have the means or be scared to death again. California RE downturns only happen in BIG job loss recessions. The wealthy will swoop in again and buy with all cash or large downs. This time is not different.

“…The city’s hidden history is now waking up. A new crop of aerospace firms is taking root, often in the same buildings as those earlier corporations. They are launching an era of personal satellites, non-state space exploration, and—someday—a private, crewed mission to Mars. Elon Musk’s SpaceX, based in Northrop Grumman’s former factory in Hawthorne, is only the most widely known example of a multibillion-dollar industry rapidly coalescing here, from the Mojave Air and Space Port in the desert north of Los Angeles to the coastal launch pads at Vandenberg Air Force Base, even to the streets and offices near LAX…”

It’s nothing much new nor very interesting. It’s simply the same cycle that is happening all over the country but of course leftist media like the Atlantic would want us to falsely believe L.A. and TaxCal is a special exception in the face of Trump. Next they’ll start trotting out unreliable numbers that the homeless problem is getting better.

“WASHINGTON—The unemployment rate fell to an 18-year low in May and employers steadily added jobs, signs of enduring strength for the labor market. U.S. nonfarm payrolls rose a seasonally adjusted 223,000 in May, the Labor Department said Friday. The unemployment rate ticked down to 3.8%, matching April 2000 as the lowest reading since 1969.”

Poor liberal doesn’t realize Uber and Lyft aren’t counted as “jobs”. Those are independent contractors and are not part of the jobs number reports. And also hilarious how the left was all rah rah rah Uber in 2014 and 2015 and 2016. Now all of a sudden Uber is worse than Hitler. You guys are so ridiculous.

“America’s job market will officially include Uber drivers and all other workers in the “gig economy” next year.”

“US. Labor Secretary Tom Perez announced Tuesday that independent contractors, temporary employees and “workers holding multiple jobs at the same time” will be included in the Labor Department’s numbers beginning in May 2017.”

Michael Rotondo finally left his parents’ nest Friday, but not before delivering one last parting shot at them — by siccing the cops on his dad over some missing Legos.

The infamous 30-year-old freeloader — whose parents won a court order to evict him from their suburban Syracuse house — called 911 reporting that his dad, Mark, wouldn’t let him into the home’s basement to search for his 8-year-old son’s Legos. …

The cops showed up, the Legos were found, and Rotondo finally vamoosed at around 9:30 a.m. — a whole 2¹/₂ hours ahead of his court-ordered eviction deadline. …

But he isn’t going far.

The notorious moocher says that he will be using the $3,000 he got for appearing on conspiracy theorist Alex Jones’ show to stay at an Airbnb rental for a week, but that he will then move in with his distant cousin Anthony Mastropool — who lives a just block from Rotondo’s parents’ house.

It was unclear how long that arrangement would last. …

So apparently, this 30-year-old man has an 8-year-old son, who lives elsewhere? Divorced?

“In the face of persistent fears that the world could be facing a trade war and a synchronized slowdown, the U.S. economy enters June with a good deal of momentum. Friday’s data provided convincing evidence that domestic growth remains intact even if other developed economies are slowing. A better-than-expected nonfarm payrolls report coupled with a convincing uptick in manufacturing and construction activity showed that the second half approaches with a tail wind blowing.

Already, the Atlanta Fed’s GDPNow tracker sees the second quarter rising by 4.8 percent. While the measure also was strongly optimistic on the first quarter as well, at one point estimating 5.4 percent growth, other gauges are positive as well. CNBC’s Rapid Update, for instance, puts the April-to-June period at 3.6 percent.”

The problem with the new law is that like everything else this psychotic blue government does, it puts the blame and burden on residents, and then walks in a big circle and stabs every last one of us in the back. Tax money that should have gone to build and repair reservoirs was squandered. And now, for the umpteenth time, we have to pay for their stupidity and greed.

They’re literally sadists. They know California is not in a drought, but they want to watch us feel pain, while they enjoy feeling the control and moral superiority. It’s sick and it’s twisted.

I already conserve water, and I’d even be okay with a limit. But I’m civilized, which means the guest toilet (used all day long) gets flushed with every use, period. A couple with two kids who all swim and exercise generate a lot of laundry. 55 gallons per person/day is not enough.

So now I have to go through the bullshit of proving to the Water Cops that we have a pool, and a 10ksf lot with succulents and palms on it, and six people living in two units who all wear clothes and poop and wash themselves. Meanwhile the state will expand one of their many useless bureaucracies, paying them outrageous salaries because someone’s back needs to be scratched (f*ck the tax payers), and use it all to inflate their righteous power trip.

The only fair way to regulate water use is by price, and CA needs to start with its major growers, who have immense holdings ranging from 25,000 acres to 600,000 acres, much of it in desert areas of the state, and who pay perhaps 1/10 the cost of capturing & storing that water behind one of CA’s 1400 dams, and shipping it to these growers on demand, often to grow low-value, water-guzzling crops. Agriculture comprises 2% of your state’s economy, but consumes 70% or more of your water… to grow crops that could easily be grown in the “wet” southeastern states like Alabama, where farmers are paid to NOT GROW these same crops. You urbanites (a category that includes anyone living in a suburb or town) need to demand pricing parity.

At least it’s per capita, which is better than per household. And there are provisions for pools and landscaping. Still, completely draconian, and hopefully will be unenforceable. As if I’m going to cooperate with the Water Police.

Regulation is mainly for local water agencies.
It is not like there will be meters installed to limit to 55/gallons day OR anyone will be counting heads in each household.
The goals will be achieved by readjustment of water tiers. averaged out across zip codes.
Nobody will be enforcing re-pipe, bath vs. laundry, and other nonsense. The goals will be met by adjusting cost of water.

And yeah, taking bath is outdated and gross (floating in your own kuddies).

“Here’s the wording of the new laws.
“Senate Bill 606 establishes a “governing body” to oversee all water suppliers, both private and public and will require extensive paperwork from those utility companies.
“Assembly Bill 1668 is where it gets personal. This establishes limits on indoor water usage for every person in California and the amount allowed will decrease even further over the next 12 years.
The bill, until January 1, 2025, would establish 55 gallons per capita daily as the standard for indoor residential water use, beginning January 1, 2025, would establish the greater of 52.5 gallons per capita daily or a standard recommended by the department and the board as the standard for indoor residential water use, and beginning January 1, 2030, would establish the greater of 50 gallons per capita daily or a standard recommended by the department and the board as the standard for indoor residential water use. The bill would impose civil liability for a violation of an order or regulation issued pursuant to these provisions, as specified.

“If you’re wondering how the government would know how much water your family is using, the utility providers will be obligated to rat you out or face massive fines. And they’re encouraged to spy in all sorts of creative ways. They “shall use satellite imagery, site visits, or other best available technology to develop an accurate estimate of landscaped areas.”
Some analysis
“Now, if you’re wondering where I get my assertion that you can’t shower and do laundry on the same day, here’s some math:
• An 8-minute shower uses about 17 gallons of water
• A load of laundry uses about 40 gallons of water
• A bathtub holds 80 to 100 gallons of water
• A dishwasher uses 6 gallons of water”

Further down in the article:

“What if you don’t comply?
“If you don’t plan to comply it’s going to be way cheaper to move. Here are the fines Californians will be looking at – and it’s not a typo – these fines are PER DAY.
(1) If the violation occurs in a critically dry year immediately preceded by two or more consecutive below normal, dry, or critically dry years or during a period for which the Governor has issued a proclamation of a state of emergency under the California Emergency Services Act (Chapter 7 (commencing with Section 8550) of Division 1 of Title 2 of the Government Code) based on drought conditions, ten thousand dollars ($10,000) for each day in which the violation occurs.
(2) For all violations other than those described in paragraph (1), one thousand dollars ($1,000) for each day in which the violation occurs.
“It’s important to note that your usage is only tracked if you have municipal water. If you have a well, at this point, you will probably be okay.”

You still like these regulations, Surge? I’m curious as to how you’re going to rationalize this. Don’t you realize that regulations are not about the general good of the populace? No indeed, they are about CONTROL of the population. Look up Agenda 21, if you want to understand what’s going on here.

“Nothing in either legislative bill specifically levies fines against customers who do laundry and shower on the same day.”

Oh really? Then why did we had a city contractor show up at our door at 8:45 last Friday morning and tell us that meters were being installed so that our water useage could be remotely read? When I asked if this was part of Jerry Brown’s future water restrictions, he said ‘yes’. If we fail to comply as a community, the water agencies will be hit with heavy daily fines, at which point they will do more than merely ‘incentivise’ us to cut our useage down to 55 gallons/day. They are getting ready to fine us individually, make no mistake.

As for using Snopes as a reference, they have been caught time and again falsifying their data. For several years people have tried to find out who exactly was behind the website Snopes.com. Only recently did anyone get to the bottom of it. It is run by a husband and wife team – that’s right, no big office of investigators scouring public records in Washington, no researchers studying historical stacks in libraries, no team of lawyers reaching a consensus on current case law. No, Snopes.com is just a mom-and-pop operation that was started by two people who have absolutely no formal background or experience in investigative research. You need to find better sources.

Ah more trump cheerleading. What great discussions this site had until you showed up. The funny thing is all Trump has to do is … do nothing and enjoy the economy he inherited from the Obama administration. But he just can’t resist messing with the Fed and interest rates, starting trade wars, hitting our allies with tariffs, pushing that awful tax cut for the rich. These actions will cause the next downturn…and all he to do was nothing and probably would be able to actually take credit for continuing robust economic growth. He will wreck it like every other Republican president has done in the last 30 years when they leave office.

Unemployment: record low
Stocks: Record high
Median income: record high
House prices: record high

If that’s a wrecked economy, I want nothing but wrecked economies from now on.

The left has literally become insane. We have the best economy in 2 generations and you’re like the guy on the corner shouting about the apocalypse. Wonder if that’s why the Dem lead is down to 2 on the 2018 generic ballot? LOL. Buh bye blue wave….

No it would absolutely crush the legal system in California. Some tenants would live for years rent free while all other civil actions (divorce, child custody, injury lawsuits) were placed on an hold for years.

Many landlords would go BK from this action because they would not collect any rent for years.

“The idea of a Bay Area “exodus” is no joke, and appears to be growing more vivid and real with each year.

A poll released Sunday by a local advocacy group showed that 46 percent of Bay Area residents surveyed said they want to move out of the area within the next few years. That number is up from 34 percent in 2016 and 40 percent last year in the same poll.”

Welp, some commenters here would rather promote the lie that there’s nothing to see here. But this poll is more objective evidence than their opinions are. The poll could have problems in its methodology but regardless it’s solidly demonstrating a trend over time that people want out of California.

Another lie they try to promulgate is that it’s only poor people leaving. I don’t think so. Increasing numbers of tech professionals from San Diego all the way up to the Bay are leaving. Their companies are also increasingly getting the F out. And we’re gonna double down on this insanity with Governor Gavin but at least he’s not lying about people leaving. I’d bet his reign will mark the end of Prop 13.

It’s definitely not just the poor that are leaving. The biggest exodus is from Silicon Valley, with Marin and Napa up there as well. I’m looking around Sonoma County (where I live) for a place to buy after this summer, and I’ve been seeing prices fall here for the past 3 months. Maybe you’re right that people have just had it. I won’t buy new because of the mandatory interior sprinkler systems, and soon-to-be-mandatory solar panels, but this latest law our idiot governor Brown passed regarding water restrictions just threw a wrench in my plans to buy. When I heard about it a few days ago, I figured that maybe I need to leave California as well. What he’s proposing is just nuts. Can you say ‘Agenda 21’ (look it up!)? I’m certainly going to start looking into places to go. I’d like to stay on the coast, but Oregon and Washington are just about as bad as California, from what I’ve heard. Maybe Nevada.

As for your comment about Prop. 13, that hadn’t occurred to me, but of course Newsom would try to eliminate that if he got into office. It’s just never-ending here. I’m going to reply to Millennial on that issue (see below) next.

Shute, Nevada property taxes are 3%. That means that if you buy a $500K house, you pay $15,000/year in property taxes. Under the new tax law, and because Social Security is not subject to California income tax, I’ll only owe ~$3500 in CA state income taxes this year. Zero state income taxes in Nevada will not compensate for their insane real estate taxes. I need to keep looking.

The power to tax and the power to regulate is the power to destroy. Often stated throughout history, and never truer than today.

You think Brown is bad, just wait until Newsom comes into power. At least Brown recognizes the boom bust nature of California’s economy. Newsom has plans for a socialist state in the image of Europe at any cost. The problem with that is California increasingly has formidable competition from its neighbors. If Newsom gets his way, even more poors are going to flock in whilst the middle class exodus will pick up steam. Meanwhile those stuck and left behind will still be sing songing hubris about weather while stepping around poop piles. Do people really want the state to turn out like the city of San Francisco has? That’s this guy’s resume.

Karin, honey, darlin’… he will get into office. I wish we could end the insanity of the months leading up to the election thinking there’s hope for anything else.

Regardless of what anyone thinks of Trump, those who get into it with him are always left worse for the wear. California got into it with Trump, Trump said fuck you with the new tax plan, and now California is going to double down on stupid with its first socialist governor.

Only about 20% of registered voters went to the polls this time. Out of those, Newsome had 33%, while that Republican Trump backed had 26%. Cox, I think. I hope that the threat of Newsom winning will wake Republicans and Libertarians up enough to get out and vote for Cox next November. it’s not over yet. Newsome WILL continue on the path of Jerry Brown, and perhaps more.

Btw. I wholeheartedly voted for Trump in 2016. I was told at my office in Oakland at the time that I was the only one in the building that backed Trump. I told ’em, not true. I’m the only one not scared to admit it.

You’ve just proven that you are an absolute idiot. That proposition was passed mainly because people on fixed incomes (mostly older people, like retirees) were losing their homes because they could not pay their ever-rising property taxes. Their taxes were increasing faster than their COLA adjustments, and they were getting liens on their houses when they couldn’t pay up. Or losing them altogether. And not just older people. Let me give you a personal example. I bought a house in Alameda in 1998, for $285K. Property taxes in California are 1% of the purchase price, plus parcel taxes and bond measures (which is how they get around Prop 13). So my annual bill was very close to $3,000/year the first year. In the less than 7 years that I owned that house, my taxes went up 42% due to numerous school taxes, AC transit taxes, a hospital tax of $300/year per parcel, that continued even if the hospital shut down, and on and on and on. During that time, as a State employee, my wages were frozen. In fact, I did not receive one COLA adjustment for 8 years and 3 months under Pete Wilson and Gray Davis (our governors at the time). One of the reasons I sold the house, aside from the fact that I knew house prices were turning down, was that I could no longer pay my property taxes without dipping into my savings. And believe me, I lived a very frugal lifestyle at the time due to my crappy salary. I was making enough to pay my bills when I bought the house, but not to pay my skyrocketing property taxes after a few years of owning the place. And this was WITH Prop 13 in place! It’s obvious that you’ve never owned a house before, because you know nothing about how house taxes can destroy your finances even with the alleged protection of Prop 13. Again, they get around 13 with parcel taxes and bond measures. Ask any homeowner in California how it’s done. Ask one that’s had a house for a few years.

As for homeowners not paying their fair share of taxes due to Prop 13, who are we paying our taxes to other than the legalized organized crime gangs known as government? We pay more taxes than any other state other than a few other Democratic strongholds on the East Coast, like New York and Connecticut, but our roads and infrastructure are falling apart. You need a Hummer to drive over some of the roads in Oakland, where I was also paying taxes through the nose when I inherited a house there a few years ago. We only pay our fair share of protection money, paid to the government so they don’t harass us further. Very little goes to the community, and even then, it goes mainly to their pet pigs. I know. I worked for the State of California for 30 years. If you think you’re getting even 10% of your money back for the good of the community (road maintenance, for example), you’d better think again.

You are just another cry baby Karin. “Poor grandma BS” is all you older guys can say when it comes to prop13. You profit from it therefore you do whatever it takes to defend it. Prop13 is a scam to screw younger buyers. An old fart who lives in a property valued at several million dollars can’t pay 1% of the market value in property taxes? But millennial should? Cry me a river! Boomers in million dollar homes should easily pay 10-20k in property taxes. Younger buyers should get a tax break. If the older people can’t afford to live in their million dollar home due to property taxes they should gtfo. That would be good for the market. More sellers. Prop13 will go and future generations will ask why did this scam take so long until it was repealed. The reason, we had too many boomers. The most Selfish generation ever.

“Let me give you a personal example. I bought a house in Alameda in 1998, for $285K. Property taxes in California are 1% of the purchase price, plus parcel taxes and bond measures (which is how they get around Prop 13). So my annual bill was very close to $3,000/year the first year.”

You bought your house very cheap compared to today’s price levels. And your property taxes are locked in. Someone who wants to buy a house in alameda today pays what – a million dollars? The property taxes would be over 10k.

So who profits from prop13 – karin who bought the house dirt cheap and pays 3k in property taxes or Millennial who pays a million for it plus 10k in property taxes?

“Millennial, since you’re so big on everyone paying their “fair share” of taxes, have you reported all your crypto currency profits on your state and federal tax returns?

I hear a lot of people invest in crypto to avoid paying taxes. Surely, you’re not one of them?”

dude, you obviously have not done proper research. If I could avoid paying crypto taxes without risking getting caught I would have seriously considered that. The exchanges report your transactions when you have a certain holding value. I by far exceeded that value. Also, the IRS looks at the significant acct holders. I am not a crypto whale but my tax liability from crypto gains were twice as much as my annual income. I would never risk to not pay and end up on the IRS’ bad boy list. The way I see it, paying high taxes means you made a killing….I am fine with that.

It’s ironic that you as a boomer mention paying crypto taxes in the context of the prop13 scam. When it comes to crypto everyone has to pay either long term capital gains or short term capital gains. When it comes to property taxes millennials have to pay 5-10 times more in property taxes as a boomer….for the same house/same service!!

Huh,
Your time frame is that of “Monkey sees, monkey does”.
Young person buys todays and pays more in taxes relative to someone who bought 30 years ago.
But in 30 years, his prop tax increase is capped, so young person is protected in the future.

A capped ripoff is still a ripoff.
The millennial has to pay way too much to begin with compared to the boomer for the same house/same service.
Boomers bought when house prices were very cheap. Their property taxes are a joke. Btw, They did not pay for tuition either as California was tuition free at some point in the past. Millennials have to pay for inflated house prices (prices are 10times over median household income nowadays ). On top of that millennials have to pay 1.2% in property taxes on that inflated house price. If I buy an overpriced condo today my property taxes are much higher than what the boomer pays next door for his mansion. No wonder people call it the biggest scam in history and want to repeal it.
Boomers benefited greatly from the housing and stock bubble. Some people think the FED is to blame….it’s the entire freeloader generation of boomers that seems to be the beneficiary of all this.

The only thing that boomers have benefited is from 300 thousands American lives lost in Europe during WW2. All other is bullshit and noise. It put US ahead of the world by about 50 years + the fact that US is still a sparsely populated country. Now, it is evening out. Losers and complainers pretend to either not see it or ignore it.

How much have you paid on your fair share? However little tax you think they pay, at least they have been paying. They’ve been paying for the roads you drive on, the parks you play on, the roads you walk on, the police and firefighters to keep you safe. How much have you paid? Lol

Oh please, don’t be pathetic. Boomers pay next to nothing in property taxes. All they did is run up the debt burden for younger generations to pay. Same with prop13. The tax burden is solely on younger generations. I don’t support the system. Once the market crashes I buy at a 50% discount and pay much lower property taxes.

It’s wrong every time you type it. Aside from the other taxes and fees that we all pay, some of which are a result of prop 13 (the damage is done), the biggest property tax burden is on new buyers. New buyers can be in their 20’s or in their 70’s. Boomers are frequently new buyers, because they can afford it. I bought in 2009 and 2017, recognize the benefits, and plan to continue buying. If prop 13 didn’t exist, you’d be paying closer to 3%, and you wouldn’t get the other protections that prop 13 gives you, such as requiring a 2/3 vote in the legislature to increase state income tax or sales tax. Eliminate prop 13, the other taxes and fees stay the same, and everyone’s property tax and income tax skyrockets. Gavin Newsom will be our next governor – without prop 13, all of us would be ten kinds of f*cked, including you.

Not sure why I bothered to write all that again, you’ve already admitted that you’d rather pay 3% of current value, as long as the long-term owners pay the same, which is a phenomenally financially stupid attitude. Your jealousy overwhelms what little brain power you have.

Prop 13 will likely be slightly modified, but luckily the residential tax benefits will not change in our lifetime. That portion is why it won by a landslide in 1978 and why it remains extremely popular among homeowners today. Homeowners vote, millennial renters… not so much. Your elected officials know this, which is why they won’t touch the residential tax benefits portion of it with a 10-foot pole – it would put their careers in jeopardy. You are aware that Senator Josh Newman was just recalled for supporting the gas tax, right? Thrown out of office by people voting with their wallets.

John D, appreciate your reasoned arguments, but there are a couple of problems.

Minnie is correct that it’s mostly burdening the young. You’re not really being straight with the issue because we all know that first time buyers are overwhelmingly younger and do not have a former basis to benefit from. What you are terming “new” buyers also includes repeat buyers who can use the Prop 13 juiced gains when they sell their former home to buy the “new” home, thereby helping to offset the new price and tax increase. That has a lot to do with being able to “afford it.”

Ten kinds of fucked is what Governor Gavin will bring regardless of Prop 13 repeal.

The Josh Newman recall was an exception. The vast majority of California’s population are libs and this was an unusual situation where a lefty overstepped in one of the very few populated red districts.

“Minnie is correct that it’s mostly burdening the young. You’re not really being straight with the issue because we all know that first time buyers are overwhelmingly younger and do not have a former basis to benefit from. What you are terming “new” buyers also includes repeat buyers who can use the Prop 13 juiced gains when they sell their former home to buy the “new” home, thereby helping to offset the new price and tax increase. That has a lot to do with being able to “afford it.””

Much of what you’re describing are simply benefits of age and time in the market. Older people just have more money, from many sources. 20 years of white collar income, stock options, 401k, an occasional small inheritance, etc. will do that. When I was younger, it was unheard of to buy in your 20’s in so-Cal, at least in my circle, and nobody complained. I wouldn’t have been able to buy a coastal property until my 40’s, or at least not one that I would want to start a family in, and I’ve never seen that as a problem that is someone else’s fault. At age 49, I’m paying outrageous property taxes ($12k/year), but I recognize that in 20 years that’s going to seem like a bargain.

I don’t believe that California’s bubble is due to prop 13. Many places on the east coast have outrageous property tax rates and equally outrageous prices. The only things that are constant are the cycles and desirability.

All that said, I know that prop 13 is broken. But there are aspects to it that must be retained, and it will never be repealed in its entirety anyway, unless nearly all conservatives leave the state. It won by a nearly two-thirds vote, many of whom were democrat home owners, and would require a two-thirds vote to repeal. I can see it reaching 40% in favor of repeal due to demographic changes since it originally passed, but I would be shocked if it went much higher than that.

It’s un-American? The Revolutionary War was fought over taxation without representation! We shouldn’t have ANY kind of property taxes, because as long as you’re paying property taxes to the government, you don’t really own your home. You are just paying rent to the government in order not to have your house taken from you. You stop paying them, and you get a government lien on your house, and eventually thrown out on your ass. Are you serious?

No, Bob. I posted this last night in an answer to Millie, but I’ll post it again here:

“Millie~

You’re always worried about all homeowners paying what you call ‘their fair share’, as if property taxes are actually used for the general welfare of the people. I’ve replied that this money is not spent on the taxpaying public, but is instead stolen by politicians and their corporate buddies. So check out this news article:

“Eric Norenberg, the city manager of Milford, praised the service while also mentioning the city’s “limited resources.”

“Facing an already harsher winter than usual for Delaware, this is an opportunity to get additional money to stretch our city’s limited resources,” he said.”

Yup, they’re going to start expecting this service from the people who are already paying taxes to the government to have this done. And why? Because it leaves more money for the officials and their friends to steal!

But back to Prop 13. This proposition put a cap on property assessments of 2%/year. What they don’t mention, and what you generally don’t find out until you get hit with these, is that they get around this cap by passing parcel taxes and bond measures above and beyond the 2% cap. In the less than 7 years that I owned my house in Alameda, my property taxes went from $3,073/year to $4,345, an increase of over 41%. Meantime, as a State of California employee (civil engineer, mind you), my pay was frozen at $61,000/year during the entire time I had my house [for a total of 8 years and 3 months under Pete Wilson and Gray Davis, starting even before I bought the property]. Millie, I wasn’t some little old fart on a fixed pension (and these people, btw, deserve a break because as they age, they can’t just run out and get another job to pay vastly increasing property taxes, just so that they don’t get kicked out of their own houses).

So what were these parcel taxes and bond measures for? Most, of course, were ‘for the children’ (a politician’s favorite phrase). Every single year, we had another school tax added, none less than $100/parcel. We had 4 parcel taxes for AC Transit Bus service added in the less than 7 years I was a homeowner. Each was preceded by massive amounts of ads showing that if those taxes weren’t passed, AC Transit would have to cut service for the poor, for the children, and for seniors, and fares would go up. Once each measure passed, however, service was immediately cut and fares were raised. They didn’t even wait for a few months after the taxes were passed, which was a slap in the face to the homeowners. And during this time, AC Transit officials started buying buses from Belgium, so that they could all go to Europe and evaluate these buses. In fact, they all had to go several times. Huge scandal – look it up. Another tax was for the failing Alameda Hospital. Another $300/year tax per parcel. The hospital directors had close ties with the Alameda city council. I don’t know anyone that could use that hospital on their insurance plan; I know I couldn’t. My sweetie’s ex had been a nurse there, and said that it was the worst hospital she’d ever worked in. They said that if we had a major quake, we needed a hospital we could go to in case our bridges went down. Of course, this hospital was so old that it wasn’t even up to 1971 EQ standards. Oh, and if the hospital still went under despite the infusion of homeowner taxes, we would still be liable to pay $300/year per parcel – for eternity.

Anyway, my pay remained frozen, but my house had gone from $285K to $720K. I was dipping into my remaining savings to pay my property taxes (and I lived a very frugal lifestyle back then), and I saw the market start to turn downward. No brainer, I sold. It worked out for me, but even if I didn’t have the profit motive, I didn’t have much choice, since I would have run out of funds to pay my house bills and taxes within the year. And this is WITH the alleged protection of Prop 13. If the tax basis had been re-assessed at $720K, my taxes would have gone to close to $9,500/year (I know this, because this is what my buyers got hit with after they bought my house). Millie, I would have been unable to afford to live in my house, a house I was eminently qualified to afford just 6 years before, if it hadn’t been for Prop 13. So no, I would have had liens on my house within 3-4 years after purchasing it if it wasn’t for Prop 13. Again, I was frugal. I remember regretting paying $15 for a t-shirt at that time, and having it affect my monthly budget. So if you think you can get a house for 55%-75% less within the next few years, it won’t take long after you buy for you to be priced out of your own home, unless you have a lot of cash sitting around, or you get a better-paying job. Prop 13 protects everybody to a certain extent. You don’t have to have owned your house for 50 years to get the benefit of this reign on government taxation.”

So no, Bob, even with the ‘protection’ of Prop 13, I had to sell this house due to the endless parcel taxes and bond measures that were not subject to the maximum 2%/year Prop 13 tax limits. And if it hadn’t been for Prop 13, I would have had to sell after just 3-4 years of ownership, if that. You don’t own your property in America. If you don’t believe me, try not paying your property taxes for a few years and see what happens. Do let us know the results.

Boomers in California are the biggest cry babies….
Look how they scream when you call out the prop13 scam. “Poor grandma! Fixed income!!”
They don’t give two shi** that a millennial has to pay 5-15 times more in property taxes for the same house/same service! All these selfish old farts think about is that their property tax bill stays ridiculous low. As if somehow they earned the right or have accomplished anything.

It’s obviously a law that only benefits them and screws young buyers. If boomers in California would have to pay even close to what a millennial has to pay they would go out on their wheelchairs and protest the heck out of it. On the other hand they brag about being millionaires because their property values went up so much thanks to the housing bubble. So these millionaires refuse to pay their fair share in taxes but enjoy all other benefits on the expense of younger generations. Typical Boomer mentality! They love when the government chooses winners and losers as long as they are on the right side of the fence! Pathetic.

Millie, I absolutely agree that younger buyers pay more property taxes than those of us who were fortunate enough to buy many years ago. Yes, I personally benefit from Prop 13. I also benefitted from buying when housing prices were low and now own two rentals. Having said that, one of the things I never hear from you is how repealing Prop 13 will look like year after year. Yes, we’ll all be paying “our fair share” as you state, but how often will the county assessors be require to reappraise your house? Once every year? Every three years? At full market value mind you – that was the law prior to Prop 13. So, if your pie in the sky price drop of 55-75% actually comes to pass, you’ll be able to buy a million dollar home for $250,000 to $550,000. You don’t know how much property taxes you’ll pay because if Prop 13 goes, the 1% tax rate may go too. Will the tax rate go to 2, 3, 4 or 5%? No one knows. Let’s call this Unknown #1.
As happens with all crashes, prices will eventually start to rise. You home will be reappraised at full market value, as I said, and your property taxes could rise 30% in a year. Now, granted, you have all sorts of cash squirreled away right now, but I’m thinking that much of it will disappear when you buy that dream home in the form of a down payment, closing costs, upgrades and the like. But again, you’re wealthy so you’ll have the cash to do it. So let’s move on to Unknown #2. It’s called life. Included in this unknown are things like devastating diseases (can you say cancer?) where no insurance covers all costs. And we’ve all heard that those costs have bankrupted thousands of people just like you. What if you develop a chronic illness like MS and can no longer work? Or if your wife has a baby or two? Or either or both of you get laid off? Or, God forbid, what if all you have saved up for retirement gets decimated by a market shift? Life happens Millie, just ask any of the wretched boomers you know – they’ve seen it all. During all this time, no matter what might be happening in your personal life, your property taxes will be rising at a rate that you can no longer control. You could be the very one to whom the next generation says, “If you can’t afford it, GTFO.” Sure, your family is here, you’ve been in your house for 30 years, and you have no desire to leave, but off you go because life happened to you and you can’t afford to stay.
I have mixed feelings about the repeal of Prop 13 – there are pluses and minuses for everyone – including you, believe it or not. The solution will not be easy for anyone, including you. So try to think beyond the end of your nose here and realize that your life may or may not turn out the way you have planned. You are either in your late 20s or early 30s and you have about 60 more years to get through. A lot can happen in those 60 years – ask a boomer – and not all of them are good. Be careful what you wish for because you just might get it.

Regardless who owns the home, the property taxes should be the same. You can’t have a boomer live in the same house as the millennial next door and only pay a tenth of what the millennial pays. I don’t care if you put measures in place to avoid yoy increases, what i care about is that the boomer pays what he should, the same as everyone else.

There are boomers in multi million dollar homes that pay 2k in property taxes. If I buy an overpriced condo for 500k my property taxes are already 6k a year.

Prop13 is a scam to benefit older people and screw the younger ones. That’s why the older people hang out in their homes forever and don’t sell. None of this “life happens bs” has anything to do with the fact that the Government chooses winners and losers. I rather pay more in taxes as long as I know the boomer next door pays the same.

The current property tax situation in California is part of the reason why we have a severe bubble. End prop13 and the bubble ends tomorrow.

Property taxes aren’t going to go up 30% in a year in the post-Prop 13 era. Stop with that drama already. The market will respond by setting prices with the absence of the Prop 13 subsidy in mind. If the government goes overboard with taxes, people of sound mind will relocate to lower tax locales and demand will wane. Hmm, sort of like what’s already happening right now except there won’t be a government handout propping up the long time holders of supply. You guys better get used to no longer using younger people as a shield against government run amok, that experiment is going to end during governor Newsom’s reign.

prop13 does not benefit older people per se. it benefits long term holders (people who mainly buy home for use, not trying to speculate).
Typically, to be a long term holder you have to be older…but thats just a circumstantial correlation.
The very short timeframe of your argument is your ultimate fallacy.
If you bought long time ago – it has benefited you
If you buy now – it will benefit you eventually

“Once the market crashes I buy at a 50% discount and pay much lower property taxes.”

If you had your way, your property taxes would not be 1% of your purchase price, but would be 1 1/2 to 2% of that price and be increasing every year as housing prices recover. You would end up paying much more than you would have under Prop 13. Within 6 years, your property taxes would likely at least triple without Prop 13.

Don’t you get it! By repealing Prop 13, you are only asking to pay more and more in taxes which would be wasted on pet projects like bullet trains to no where.

Come on Gary. You are smarter than this. Why not repeal prop13 and replace it with something that does not put the tax burden solely on new buyers? Have boomers pay .5% of current market value and new buyers do the same. Boomers will hate on any suggestion to change existing laws because they are the beneficiaries. As long as nothing changes for them they are fine with us having to pay insane property taxes.

It’s too soon to know who will be paying more. Governor Newsom and Sacramento are sure to come up with a wonky post-Prop 13 transition plan that will have all sorts of parameters. Living in a socialist state is going to be interesting, but hey the weather is always perfect, right?

Millennial, why do you want to pay higher and higher property taxes? You never answer that basic question. Here’s what would happen if homes prices drop in a few year. Your dream home drops from $800,000 drops to $400,000, and you buy it in 2020 with and without Prop 13 protection:

In 2020, you purchase your bargain home for $400,000 and Property tax is $4,000 per years

After Proposition 13 is repealed, the tax rate immediately rises to 1 1/2% so your property tax increases to $6,000

In 6 years (2026), home prices recover and your homes is now worth $800,000 so your property tax is increased to $12,000.

By repealing Prop 13, you are wishing to pay $12.000 in property taxes in 2026 instead of only $4,000. You are dreaming if you think the property tax rate would drop to 1/2% without Prop 13. The local and state governments would simply spend any windfall they got on new government programs, public employee salaries and pensions, rapid transit projects to nowhere, etc. Since there would no longer be any limit on the property tax rate, it would surely increase over time to 1 1/2% before 2026.

Do you wish to pay $4,000 or $12,000 in property taxes in 2026? The choice is yours.

Second – the price of the home could stay flat or go down, especially considering we would eliminate the government handout to the existing asset holders, thereby no longer incentivizing them to hold supply in order to keep the subsidy.

Millie doesn’t answer your question because the premise isn’t objective. On the other hand, he doesn’t answer my question to put a date on his 55% drop claim because his premise is also not objective.

1) The Prop 13 taxes are inherited from generation to generation. What are we? Feudal Europe where the castle and serfs are passed down to the next generation? Why should someone like Millennial inherit 1970’s Prop 13 tax levels when his parents die? Should we make his title Baron or equivalent? Baron Millennial?

2) The stepped up cost basis is ridiculous and creates dynasties and barons. Why does the basis for a house that was purchased in 1970 for 20K now step up to the value of the house when the parent passes away? Why should Baron Millennial only pay taxes on the difference of new basis of $1M and the selling price? Ie if your parents purchased a house for 20K in 1970 and passed away in 2018 when the house is worth $1M. If the house then sold for $1M then the children heirs like Baron Millennial would likely be able to declare a loss and claim a refund on their taxes.
The true capital gain is over 900K but Baron Millennial gets a tax refund???

Millennial better be careful or the 2 items above that he protests if they are repealed, may wipe him out when sadly, his Boomer parents pass away.

However, Pre-Prop 13, the tax rate was 3% (instead of 1%). IMHO, that is the reason the original Tea Party promoted Prop 13 to the public and why it widely passed.
I think that was a valid point.

Putting a 2% cap on tax increases even though in the 1980’s, inflation and wage increases were running 8+% was a terrible idea. Young Boomers and Silent Generation were in their prime and getting 10% wage increases per year while their tax increases were locked at 2%. That devastated education in CA and led to the tremendous CA public college tuition increases.

You treat home as a stock. However, if someone sells home today for 900k gain, you still really can buy no more than identical home. And if you pay tax, then you cannot buy the same home. Evem though you had 900k in profit.
Housing is not a passive investment. It is still an utility, not fonamcial instrument
Different rules should apply

Why does poor grandma need to live in a mansion? If she has to start paying the correct amount of property taxes like everybody else and struggles with it ….HOW ABOUT DOWNSIZING???? Elderly people in California have no reason to downsize thanks to prop13. One of the reasons why we have no inventory. This debate is ridiculous. It can’t be that a new buyer has to pay multiple times more in property taxes than his/her neighbor for a similar property!! #repealprop13

There are plans in the works to modify Prop 13 for commercial property.
IE: If I own a strip mall and my taxes go up dramatically, the majority of leases on commercial property are NET leases – tenant pays for the utilities, taxes, maintenance. So, then the small business owner gets screwed, right? he wont pay the dramatic increases in taxes, he will close his business. How does this benefit the economy overall???

Let me ask you…. how does this current economy benefit younger generations? Stock bubble , housing bubble !
Why would younger generations have any interest in buying into these bubbles? Wouldn’t it make much more sense to buy in when this fake economy fails.
Boomers might think differently…wonder why 🙂

Rents will have to fall in order to make up for the difference. Overextended commercial landlords will be forced to liquidate their properties. Prices will reset. Oh well, all parties eventually come to an end.

So many anchor stores of malls are on the edge of bankruptcy. Amazon can easily move warehouses from state to state as the delivery services cross state lines. There are only so many trendy cafes that can move into old buildings near where the hipsters congregate. Because of prop 13, a lot of retail space has stayed under the same ownership for a long time. Shorting retail real estate space in CA would require shorting a REIT that owned a whole lot of it, don’t you think?

I can’t! It’s impossible to tell exactly when the crash will happen. My educated guess is a 55-75% drop in 2020. It doesn’t really matter to me if it happens next year or in five years. I am young, got cash and can wait. I am not really looking forward to being an homeowner. I grew up in an enormous house. Lots of liabilities. When the market crashes by 55-75% I am forced to buy because we will have rental parity and it will make financial sense. I will own no matter what… my parents and in-laws own houses.

Surge,
“2) If prices do not go down, well I just enjoy my current home as is.

Do you have a strategy for #2? This is the question I have always been asking. Because buying a home is very important to you eventually, so I just want to make sure you are covered.”

Of course-if prices don’t crash I don’t buy of course. I only buy low. I will own no matter what. My dad owns several houses. He is a landlord of multi family. My in laws own two big houses (one inherited just recently the other is their primary residence).

I’ve been down the road Millennial is on, and I gotta say it was a huge mistake. From the ages of 21-28 I religiously saved and read websites like ZeroHedge, Housing Bubble Blog and this one in anticipation of a well deserved crash. In all reality, a crash SHOULD have happened and savers should have been greatly rewarded. Instead, I watched as friends with little savings bought homes that appreciated greatly over the last few years.

Right or wrong, whether its the, “powers that be” or something else the system is broken. In today’s society savers are punished and those taking huge and egregious risks are rewarded. I don’t see how housing will be allowed to drop again any more than 15% before the Fed backs the truck up and dumps negative interest rates on us. To say that housing will drop 50% in high demand areas is I believe ludicrous. And this is coming from a true believer who watched and wanted this to happen for 8 YEARS.

Eventually I got sick of watching homes rapidly appreciate in San Diego, and a little over a year ago bought with a massive down payment. The area I purchased in fell much less than others in the crash and with my huge downpayment I feel protected against depreciation. Not that it matters because I won’t be going anywhere and have no other debt besides the mortgage. I simply got sick of waiting and now enjoy having a garage, large yard, AC, privacy, extra bedrooms for guests, a wonderful dog, Jacuzzi and so much more.

To Millennial, I would just say ask yourself whether you are missing out on things you really want betting everything on an impending crash. For me personally, I was so I made the leap of faith and got in. I got sick of living in a 600 sqft apartment waiting forever for the crash that never came. Since purchasing, based on comps my home has appreciated over $100k. It doesn’t matter because again I wont be moving, but it doesn’t hurt.

I bought twice near the top of a market, but after nearly thirty years it makes little or no difference. My Daughter bought half-way to the bottom of the last housing crash and moved to a bigger place halfway through the current recovery. She broke even on the first deal and made out like a bandit on the second. The long haul is the answer unless you’re just a speculator.

Oh, yes, it sucks to own a house free and clear that I paid less than 30% of its current value for. The difference between less than 30% and less than 25% hardly matters 30 years later. I could always afford what I bought, and now I can sock away money in my 401k at the maximum rate for another 4-5 years. Nice neighbors and a 30-40 minute commute are OK with me, too.

This was exactly my situation as well I did all of the above where I was a bear for a long time by reading the same sites and listening to Perma bears not really paying attention to the market around me and realizing that there are so many people outside of our little bubble in California that have tons of money.

I was in a nice condo under Market rent in a nice city in Orange County but it really wasn’t fair to my kids that we had to live the condo life when I was financially able and stable enough to get a nice big house with a big yard. I was not willing to wait another 3 to 8 years as Millennial predicts and watch their lives go by living in a small condo so I too pulled the trigger bought made some improvements and have immensely enjoyed the big house with the huge yard. My older son who my wife never wanted to have his friends over in our small condo now has friends over everyday playing in his room or in our huge backyard or hitting the pool orplaying soccer on the grass to me that’s priceless.

If you are financially stable, I say go for it. I refused to burn my kids young years sitting on a maybe. It was the best decision of my life no matter what the market does.

But according to Millie, you’re an idiot. What’s the ROI on your grass and pool? Or on your kids?

Life at future Millie’s house- “Well you see son, grass and landscaping costs money. So why don’t you go play in the dirt so daddy can go buy some more coins. And why are you always over at Johnny’s house playing in their pool? Why don’t you stay home and I’ll sign you up on coinbase. Doesn’t that sound fun?”

The perma bears you read on this and other similar sites are usually single dudes with no kids. If I were in that position I’d too live in an apartment (although I’d still own all my rentals). And like you said, on paper you might be better off waiting 8 years, but by then your kids would have spent 8 years living in an apartment. And really what kind of life is that? Not everything in life is about maximizing return on investment.

Having a big yard for your kids is, as you say, priceless. I spent a ton of time/money decking out the yard for my kids…awesome patio, built in BBQ, fire pit, playhouse, sandbox, swings and about 1/2 an acre of grass. Also strategically put in trees to provide shade at the right angle, during the hottest parts of the day.

The perma-bear singles read that and have an aneurism. OMG OMG don’t you know you could have saved $1000s of dollars by not doing that and just having an un-landscaped back yard instead? You will never get your money back!!! Yeah probably true, stuff like that is a sunk cost. But for the thousands of hours my family will have spent outdoors using all of it, it more than pays for itself.

Absolutely. I did something similar in regards to landscape and pool decking. Probably won’t get that back on any resale, but, I don’t care. It’s about having something that I want for my family and myself that makes our lives better. That’s the thing, quality of life. My quality of life is exponentially better now, and how would you quantify that in dollars and cents? I bought the perfect house for myself and family that is very affordable and has everything we ever wanted. Sure I could still be living in a condo or a tiny apartment such as mille with many more zeros in my account, but, quality of life would be garbage as opposed to now.

Just this past weekend we had our friends and their kids over and we all played in the pool and had a few beers and lunch and just relaxed, pretty difficult to put a price tag on those types of memories.

But hey, maybe in 12 yrs I could get 50% off this house after it appreciated 30%, lol.

Socalguy, when have I ever said Dan is an idiot for buying now?I am happy he bought. I want people do buy now – less competition when the market crashes.
Also, since when do you have to buy an overpriced house in order to enjoy pool time? First off all I live close to the beach. Swimming is no problem. Second, when I
Buy a dream house in all cash the people who bought high still have to pay for the overpriced house they bought during peak. Living a frugal life now does not mean I live like that when I have kids…I could buy now but have the time and patience to wait for a buying great opportunity. Be assured I will share as soon as I buy 🙂

By the way, signing up at Coinbase is a fantastic idea, you also want that binance account for the alt coins and a ledger nano s for cold storage.

Landlord gets it! Entrance fee to a public pool is just a few bucks. Most condo complexes have a pool anyways or you just rent a house with a pool if you like swimming nude. There are ten better (cheaper) options than buying a massively overpriced home with a pool. It all changes when the market crashes by 55-75%. Than you just buy a dream home at a huuuge discount (and at rental parity). The pool will be included.

Kristopher, congratulations on your purchase. I remember reading your blog entries several years ago. Putting your life on hold and waiting for the unknown (the big crash) only can last for so long. History has shown that if you can comfortably afford CA RE and plan on owning for the long term (10 years plus), buying is correct choice. Rent vs. buy equations rarely include any of the intangibles you listed, and those can be worth quite a premium. Congrats again!

True. A big house with a big yard can be rented. I have rentals with fairly large yards. And my tenants are paying my mortgage. In 10-15 years those large yard houses will be owned free and clear by yours truly, thanks to renters like you. From the bottom of my heart, I thank each and every one of you.

@ good for you,
I couldn’t agree more. I took the risk to invest in bitcoin and other cryptos which paid off bigly ( as trump would say)
I sold close to bubble peak in 2017! It would be nice if get another 2017 year in crypto. Sometimes when you see a once in a lifetime opportunity you gotta crap them by the pus**. (Terrible trump reference)

Minnie – pretty sure your level of risk with crypto is nowhere near the level of risk you claim everyone who buys is taking. To borrow the provided analogy, your situation is like the teenager who finally touched some boobies and now thinks he’s in the same league with adult men.

“I’ve been down the road millennial on”
Congrats! My road…..is making a killing in crypto, live a frugal life and buy assets low. If you are on that road, you got my respect!

“ From the ages of 21-28 I religiously saved and read websites like ZeroHedge, ”
What year was it when you were 28?

“I got sick of waiting”
Huh? It’s not like I am waiting on the couch and have nothing else going for me. “Waiting” means I enjoy a debt free life, travel, save a ton, and can sleep at night. Imagine I would buy high and be under water during the next crash. That would suck!

“Ask yourself if you are missing out on things you really want”
So, I really pursue happiness and a stress free life. Well, you always have some level of stress. I got several promotions at work and now I make over 100k! To get there was somewhat stressful. But I did it! The other thing I really wanted is bring debt free. Being a debt Slave is, well, a slave! I also wanted to have a large down payment ready for when the market crashes. I am there! All I have to do is wait until the market crashes when the bubble pops! We all know the bubble will pop. The only question is when. Well, does it really matter? If it pops next year great! If it pops five years from now…great! That means five years more of saving money!
Why buy now and waste your money if you can rent a nice place for much less?

You can easily figure out Kris’ post is fake. He does not provide you with any detail ( how much he paid for the house, in which are he bought etc).

But I love those posts. I get addressed, can tell my story and help others to not make the mistake older people did….buy high and get screwed financially! You are welcome 🙂

Millennial, it doesn’t matter to me whether you think I’m lying or not. I posted here a couple of times over the last few years asking for advice and lamenting about the state of the housing market in SoCal. Only sharing my experience as someone who walked your road and had an enormous amount of savings and waited. I did a fair amount of international traveling too and lived by the beach so it wasn’t like I was suffering while saving by any means. If you feel comfortable in your lifestyle and can wait, then that’s great. I ended up buying because the wait was no longer worth it for me personally.

As to buying at a peak or the wrong time, it does not matter to be honest. I put down close to 40% with plenty of savings left over and can easily afford my mortgage. In a way the saving did pay off because I was able to purchase in a historic neighborhood for around $650k that I could have never afforded even at the bottom of the market due to a lack of savings at the time since I was only 23 then. Now I’m 29 and while things didn’t go exactly as I planned with the market, I can still enjoy living in a great area with a affordable mortgage and large amount of equity at a young age.

Dude, making over 100k is fantastic for my age and in my area. Yeah, the same job pays maybe 160k in SF but the cost of living would be higher too. Same with la. Luckily I don’t live there and enjoy a very cheap rent. I don’t even wanna mention how much money I save per pay period and how much is already in my 401k plus my wife’s income 🙂

I get it…you don’t live in California so you can’t acknowledge that some people do well here. Same with landlord…California bashing at its finest

“Guess which state has the highest poverty rate in the country? Not Mississippi, New Mexico, or West Virginia, but California, where nearly one out of five residents is poor. That’s according to the Census Bureau’s Supplemental Poverty Measure, which factors in the cost of housing, food, utilities and clothing, and which includes noncash government assistance as a form of income.”

In my mind making over 100k where I live is fantastic. I am more than happy with it. If you disagree. Great. Let’s agree to disagree. If you make that amount and don’t feel like you are getting anywhere maybe it’s a spending problem?

@Kristopher sorry man, but you were just too naive during all these years. It was a great time to buy 5 years ago, basically, you’ve done the worst thing you could do, you were waiting a few years and bought on the top of the cycle. It was stupid to wait for a crash 5 years ago, it totally makes sense to wait for it now.

Exactly! That be extremely bad if everyone would save money and wait for the crash. I need people to buy now. Less completion later. My plan: buy the dream home in all cash, retire early and write a book about the California boom and bust cycle, crypto investing, bubble blogs and my way of success.

We all know and agree that prop13 has to be repealed. It’s the biggest scam in history and boomers are way overdue in paying their fair share.

Boomers know the freeloading will end at some point but they would like to know how this change (repealing prop13) will look like. I sort of understand but that’s like saying we hesitate to put the convicted criminal behind bars yet because we are unsure about his diet.
For example, the criminal might be gluten free but in prison some of the afternoon snacks include gluten. Well, he might not be able to eat snacks in the afternoon because of that or he might have to live with a stomach ache. But that should not prevent us from putting him away, right?

It’s the same with prop13 and boomers. Repeal it and have boomers finally pay what they should be paying. After all, they haven’t paid their fair share in decades.

A boomer who lives in a 2 mio Dollar home has to pay over 20k in property taxes. That’s what a millennial has to pay. The fact that this boomer might only pays 2k as of now is outrages. We can discuss about the details later but the boomer is overdue in paying 20k. Also, paying the same property taxes as millennials will give the boomer some appreciation for what we are going through. The boomer has enjoyed all these services but hasn’t really paid for it. Millennials do.
If the Boomer can’t afford that or is not willing to pay that – there is the door. Nobody is forced to stay in a high tax state like California. But we can’t have an entire generation of freeloaders that can continue to stay in big mansions (that they don’t need) and have millennials pay the price for it.

So, let’s not wait any longer. Repeal prop13. It’s the right thing to do.

Millennial, why do you want to pay higher and higher property taxes? You never answer that basic question. Here’s what would happen if homes prices drop in a few year, and your dream home drops from $800,000 drops to $400,000 when you buy it in 2020 with and without Prop 13 protection:

In 2020, you purchase your bargain home for $400,000 and Property tax is $4,000 per years

After Proposition 13 is repealed, the tax rate immediately rises to 1 1/2% so your property tax increases to $6,000

In 6 years (2026), home prices recover and your homes is now worth $800,000 so your property tax is increased to $12,000.

By repealing Prop 13, you are wishing to pay $12.000 in property taxes in 2026 instead of only $4,000. You are dreaming if you think the property tax rate would drop to 1/2% without Prop 13. The local and state governments would simply spend any windfall they got on new government programs, public employee salaries and pensions, rapid transit projects to nowhere, etc. Since there would no longer be any limit on the property tax rate, it would surely increase over time to 1 1/2% before 2026.

Do you wish to pay $4,000 or $12,000 in property taxes in 2026? The choice is yours.

You won’t have unstable increases in prices like that if Prop 13 is repealed so the tax will be factored in with reasonable increases in property value. The entry point into housing will then not be ridiculous for first time buyers.

“You won’t have unstable increases in prices like that if Prop 13 is repealed so the tax will be factored in with reasonable increases in property value. The entry point into housing will then not be ridiculous for first time buyers.”

The rollercoaster ride of housing prices is caused by the fed and federal government policies and manipulation, not state tax laws.

What is the difference between 1995 San Francisco ($266k median) when prop 13 had been in place for 17 years, and San Francisco today? Was prop 13 inflating prices in 1995?

The higher the U.S. population gets, and the more wealth that accumulates in an area, the higher prices get (on average). Desirable areas have higher highs and higher lows. Greenwich, CT, for example – median is currently over $2m, state property taxes are 2%. In the 90’s their median was about the same as SF. So if taxes are so high, why aren’t their prices lower? Because prices increased due to wealthy businesses and individuals moving in, just as the bay area increased due to tech money.

It wouldn’t surprise me if prop 13 is inflating prices a little, but even if it is, it’s imperceptible. You can find very low taxes with very high prices (Hawaii) and very high taxes with very high prices (wealthy areas all over the northeast). If there’s a correlation of taxes and prices, it’s pretty well hidden. The correlation of wealth/desirability and prices is blatant.

There won’t be any civil war over this issue. Most of the motivated reasonable people have already gone or are leaving the state. They leave behind a majority apathetic class and an increasing amount of leftists.

Jeddie old chap, you don’t have to accept Prop13. I’m sure your city/county will gladly accept any money you want to send them in excess of the property tax bill under P13. It’s always amusing with leftists who whine about wanting to pay more taxes…..nothing is stopping you. The IRS also has a website where you can contribute money. Funny enough nobody ever uses it, not even the crusaders for higher taxes like Hollywood, Google execs, Warren Buffet, Bezos, etc. Weird huh?

You spell it millennials….but it’s okay 🙂
I for sure will be a millionaire (considering cash, 401k, crypto it’s not that hard to accomplish). Retiring at 58….not sure about that. I like what I do and make great money. I could see myself retiring early but would still do something part time. It would be kinda boring otherwise. Maybe I manage rental units.

You’re always worried about all homeowners paying what you call ‘their fair share’, as if property taxes are actually used for the general welfare of the people. I’ve replied that this money is not spent on the taxpaying public, but is instead stolen by politicians and their corporate buddies. So check out this news article:

“Eric Norenberg, the city manager of Milford, praised the service while also mentioning the city’s “limited resources.”

“Facing an already harsher winter than usual for Delaware, this is an opportunity to get additional money to stretch our city’s limited resources,” he said.”

Yup, they’re going to start expecting this service from the people who are already paying taxes to the government to have this done. And why? Because it leaves more money for the officials and their friends to steal!

But back to Prop 13. This proposition put a cap on property assessments of 2%/year. What they don’t mention, and what you generally don’t find out until you get hit with these, is that they get around this cap by passing parcel taxes and bond measures above and beyond the 2% cap. In the less than 7 years that I owned my house in Alameda, my property taxes went from $3,073/year to $4,345, an increase of over 41%. Meantime, as a State of California employee (civil engineer, mind you), my pay was frozen at $61,000/year during the entire time I had my house [for a total of 8 years and 3 months under Pete Wilson and Gray Davis, starting even before I bought the property]. Millie, I wasn’t some little old fart on a fixed pension (and these people, btw, deserve a break because as they age, they can’t just run out and get another job to pay vastly increasing property taxes, just so that they don’t get kicked out of their own houses).

So what were these parcel taxes and bond measures for? Most, of course, were ‘for the children’ (a politician’s favorite phrase). Every single year, we had another school tax added, none less than $100/parcel. We had 4 parcel taxes for AC Transit Bus service added in the less than 7 years I was a homeowner. Each was preceded by massive amounts of ads showing that if those taxes weren’t passed, AC Transit would have to cut service for the poor, for the children, and for seniors, and fares would go up. Once each measure passed, however, service was immediately cut and fares were raised. They didn’t even wait for a few months after the taxes were passed, which was a slap in the face to the homeowners. And during this time, AC Transit officials started buying buses from Belgium, so that they could all go to Europe and evaluate these buses. In fact, they all had to go several times. Huge scandal – look it up. Another tax was for the failing Alameda Hospital. Another $300/year tax per parcel. The hospital directors had close ties with the Alameda city council. I don’t know anyone that could use that hospital on their insurance plan; I know I couldn’t. My sweetie’s ex had been a nurse there, and said that it was the worst hospital she’d ever worked in. They said that if we had a major quake, we needed a hospital we could go to in case our bridges went down. Of course, this hospital was so old that it wasn’t even up to 1971 EQ standards. Oh, and if the hospital still went under despite the infusion of homeowner taxes, we would still be liable to pay $300/year per parcel – for eternity.

Anyway, my pay remained frozen, but my house had gone from $285K to $720K. I was dipping into my remaining savings to pay my property taxes (and I lived a very frugal lifestyle back then), and I saw the market start to turn downward. No brainer, I sold. It worked out for me, but even if I didn’t have the profit motive, I didn’t have much choice, since I would have run out of funds to pay my house bills and taxes within the year. And this is WITH the alleged protection of Prop 13. If the tax basis had been re-assessed at $720K, my taxes would have gone to close to $9,500/year (I know this, because this is what my buyers got hit with after they bought my house). Millie, I would have been unable to afford to live in my house, a house I was eminently qualified to afford just 6 years before, if it hadn’t been for Prop 13. So no, I would have had liens on my house within 3-4 years after purchasing it if it wasn’t for Prop 13. Again, I was frugal. I remember regretting paying $15 for a t-shirt at that time, and having it affect my monthly budget. So if you think you can get a house for 55%-75% less within the next few years, it won’t take long after you buy for you to be priced out of your own home, unless you have a lot of cash sitting around, or you get a better-paying job. Prop 13 protects everybody to a certain extent. You don’t have to have owned your house for 50 years to get the benefit of this reign on government taxation.

A lot of good info regarding the ramifications of Prop 13 has been laid out for you in this thread, but you choose to ignore all of it repeatedly, and you will probably ignore what I just wrote. It’s as if you can’t let new knowledge into your brain. “Awwk, Polly want a cracker, pay your fair share Granny, awwk, awwk awwk!” That’s how you sound.

So in closing, let me say one more thing. You have mentioned that you will get a house one way or another, either after this alleged 55-75% crash, or when you inherit the property of your parents or your in-laws. Don’t you realize that you will inherit their tax basis as well, which will be kept low under Prop 13 until it’s handed over to you.

Btw, and in closing, isn’t it a little ghoulish to say that you’re certain it will all be yours someday? It’s as if you’re waiting for your parents and your wife’s parents to die, so that you can be land rich. You’ve mentioned it so many times that when I picture you, I always picture a vulture sitting and waiting. You might want to tone down your talk about this. And especially don’t let your or your wife’s parents know where you are posting this, as you might just find yourself dis-inherited.

Karin, Stop whining. You could have gone and found another job, always blaming government/anybody. Always have a name attached to every one of your troubles. $120/month increase in tax is bad, but not that bad, now you have to put up with annual rent increases which will outstrip your “savings”. You made a killing on selling your home (on which you paid zero tax probably).
And you were dipping into savings to pay for extra $100/month? For a home bought for $285k and with a 5k take home income? And living a frugal lifestyle? Come on, do not bullshit us.

After Obamacare happened my insurance increased by $300/mo. It sucked but life didn’t end for me and I don’t go around whining about it endlessly. Yeah I’d prefer to pay $300 less, I hate O-Care, but spending all my time ranting about it won’t make my insurance premiums go down. So yeah OK your property tax increased $120/mo. It sucks. But come on, just get on with your life.

Thank you for saying exactly what I ALWAYS want to say to Millie. He simply hasn’t lived long enough to know enough about the world to even comment on this. He hasn’t the least idea of what his life will look like in 10, 20 or even 40 years from now. He constantly maintains that all the boomers are rich – maybe the ones he knows are, but a vast majority of them are just living paycheck to paycheck.

His whole argument about repealing Prop 13 has nothing to do with the housing market or market values for homes, it’s all about making the Boomers pay” their fare share”. He has no response to what it will do to HIS property taxes once he buys a home, because he doesn’t care. For him, it’s only about the Boomers being evil, selfish, greedy and entitled.

He needs to take a look in the mirror because he is so clueless that he doesn’t even know I have just described HIM. He’s a child, the poster boy for why so many Boomers despise millenials. “Gimme, I’m entitled. I deserve to have everything you have.” If he wants Prop 13 repealed, he needs to get off his ass and get out there an do something about it. He wants change but he certainly isn’t willing to actually DO anything about it, he’d rather just hang out here and complain. Another charming characteristic of the typical millennial.

Millie will challenge this, I know, so I’d like to remind him that I’m not talking to him, since he clearly doesn’t listen to anything anyone else says. I’m talking to you Karin, and again, thanks.

I totally agree with you, and not far behind him is Surge. No matter what others post, he continues on with the same babble, while never addressing issues others have raised. Frankly, it’s so tiresome that it’s not even worth responding to. I see he’s posted another one right after yours. I will try not to react.

I’m scanning the first two of his paragraphs, and it’s the same bullshit over and over. There is no original thinking going on here, let alone comprehension. I am going to pass.

Babsterina,
You seem very emotional? Why? Are you afraid the freebies (prop13 for boomers) is going away? Well, it should. It’s a government subsidy that only benefits boomers and screws millennials. If boomers live in their overpriced home from paycheck to paycheck why don’t they downsize or move? You got it, because of prop13. They pay next to nothing in property taxes while millennials have to pay thousands of dollars for smaller homes. You are fine with this-of course. As long as you get the freebie.

Of course this will end….entitled brats like you can yell and scream. It won’t help you.

Oh sure, someday the economy might collapse so that all fiat currency will be worthless. Then who knows what becomes of our current tax structure? But on that day, your own portfolio will be worthless. You’ll be so focused on looting for food, and protecting your scraps, that you won’t have time to fantasize about buying beach houses at 75% off.

And no one will care about your then-worthless crypto (assuming there’s still power to run the internet).

Son,
“Prop 13 will never end”
Whenever people say NEVER, EVER or ALWAYS be careful.

For example John d claims that nobody said “interest rates will never go up again in our lifetime”. Just a year ago RE cheerleader were claiming this on this blog.

They also claimed buy now or be priced out forEVER.
And, if you don’t buy now you will NEVER own.

It’s a pathetic attempt to implement fear. Fear or never be able to buy or fear of missing out. These sales tactics worked on previous generations and the result was 7 mio foreclosures.

Btw, foreclosing is easy. All u need to do is buy an overpriced home and lose your job during the next recession. Just like during the last bubble, people are buying overpriced homes and have to pour most of their income into an asset that will lose 55-75% of its value when the bubble pops.

Of course prop13 will be repealed. Younger generations will stop the freeloading (boomer subsidies). Enjoy it while you can.

Here’s some more for you: Milli will NEVER be able to buy a California beach house at 75% off of today’s prices.”

Advising to be careful of these sales pitches utilizing words like never, always, ever has nothing to do with whining. These sales tactics are meant to implement fear to sell something that is highly overpriced. Basically you want to sucker in the dumb ones. I simply dismantle it. That’s called wisdom. That word also starts with a w but is very different from whining.

As far as the 75% discount of a beach home goes. It’s seems very realistic during the next crash given the overpriced bubble we are in. On the other hand I am fine with buying it at 55% off as well. My educated guess is 55-75% drop once the bubble pops.

“ If the tax basis had been re-assessed at $720K, my taxes would have gone to close to $9,500/year (I know this, because this is what my buyers got hit with after they bought my house). Millie, I would have been unable to afford to live in my house, a house I was eminently qualified to afford just 6 years before, if it hadn’t been for Prop 13.”

So you are totally fine with the fact that new buyer gets ripped of and pays multiple times what you paid…..you did not address once how incredible unfair it is that boomers pay only a fraction of what millennials have to pay in property taxes for the same house/ same service. All you care is that your property taxes don’t go up.

I am fine with my property taxes being capped but what needs to happen is that boomers start paying their fair share. Why should the tax burden be solely on younger generations just to keep these old people in their 5 bedroom houses? They are millionaires on paper so they should pay property taxes like a millionaire, right?

I would be happy if older people can’t afford to live in their big houses due to paying their fair share in property taxes….than they would finally downsize!

I don’t understand your comment about my inheritance. It’s not like it’s a secret or awkward. They showed me their will. Also, it’s not like I can’t wait until they die….I much rather have them live forever but it’s just the circle of life. Kids inherit their parents stuff…not sure what the issue is by saying that. It’s the perfect response to RE cheerleaders saying if you don’t buy now you will never own or buy now or be priced out forever.

Sry, your sob stories in regards to prop13 are kind of funny….millennials have to pay multiple times what you pay and they aren’t cry babies about it. All we are saying is it needs to be corrected. You guys bought RE on the cheap side and profited from the bubble plus you ran up the national debt burden. And on top of that millennials are screwed by prop13 because we have to pay 1.2 % of the inflates house value. Boomers are one selfish, pathetic generation.

Millenials are mid-thirties now.
Lots of them bought houses in their 20s.
Some of them bought in 2009.
Many x-geners (in mid40s) bought before 2006
many in mid50s bought 20-30years ago.
They all benefit from prop13.
Some very young people inherited with very low tax base
Many young people WILL inherit with very low tax base (repeal of prop13 will actually cause them to lose the base) – YOU included.
It is a very wide spectrum of people who benefit from prop13. The only thing that is common to them is that they (or their parents) never sold real estate (long term housing).

Karin, you guys are not listening because of emotions about the issue. Without Prop 13, property taxes wouldn’t normally be going up as high as you suggest because PRICES would be lower due to the absence of the SUBSIDY that distorts market price action.

Would the tax burden still be relatively high? Yes, but it will be more equitable for first time buyers and that is the point.

I’m glad you mentioned the parcel taxes because some naive people here like to suggest Prop 13 “protection” as a given.

What the government does with the tax money is totally beside the point. Clearly prop 13 has done nothing to keep Sacramento from recklessly spending.

All of this bickering doesn’t matter anyway because Newsom and the state legislature is going to render it ineffective.

You make a good point, but Prop 13 is only a minor reason that house prices are high, and that’s because people can’t afford to move into a condo from a family house due to the new taxes they’re assessed, and they have to stay put. House prices are sky-high all over the nation, yet very few other states have Prop 13-like protections. So it’s not due to Prop 13 alone.

The main reason prices are nuts is the same reason they were nuts over a decade ago. Artificially low interest rates, low down payment requirements, easy loans. In other words, Federal Reserve manipulation creating constant booms and busts. When I was growing up, housing markets were not manipulated like this, and prices were amazingly stable and affordable. It’s obvious what’s going on here. Once rates go up again and loans tighten, watch out below. It’s like a game to the people that control this economy.

If prices are sky high all over the nation, then they are in outer space for California. You can’t honestly compare the price to COL to income ratio which is pathetic in California to possibly “elevated” in *most* of the rest of the country. By the way the prices got wildly out of control AFTER prop 13. It’s no coincidence.

The first bubble was in the late 1970s, but I think it was more of a coincidence. I’ve been looking at house prices all over the U.S., and although the price to income ratio is crazier in the Democratic states like NY and CA, most other states don’t have Prop 13-like restraints on their property taxes. I mean, how do you explain Connecticut, Washington state, and others like them?

Higher tax rates have been shown to be connected to slower appreciation in some areas, but not always, and usually only in less desirable areas. If everything else was equal (income, employment, net worth, weather, schools, etc.) there would be a noticeable effect of taxes on prices. We can see that to some extent in flyover country where all of those things tend to be equally shitty. But everything is never equal in bubble areas, which makes it nearly impossible to measure there, but two things stand out – the inconsistency of a tax effect on prices, and the obvious, consistent effect of wealth and desirability on prices. Like my Greenwich, CT example with 2% taxes and $2m+ median listing prices. Higher prices and much higher taxes than the bay area. This is repeated all over the northeast, and there’s always a good reason for it that has nothing to do with taxes – like tech in California, finance in the northeast, and foreign investment in both. Any effect of property taxes gets lost in the other noise of a wealthy area.

Given all of that, I suspect that with a repeal of prop 13, prices would be noticeably more affordable inland (something more along the lines of bedroom communities in the east) but still unaffordable in desirable coastal areas. In other words, SF might have a $1.2m median instead of $1.3m. Your average 20-something still won’t be able to buy in Manhattan Beach, and it still won’t be the boomers’ fault.

Prices will drop ~30% in those areas regardless of a prop 13 repeal, so if the goal is to own there, that’s the time to do it.

Millenial isn’t the only one here who thinks prop 13 is a pile of garbage. You just don’t want to listen to his viewpoint because you view him as a “troll.”

Prop 13 is just a freebie for boomers while everyone else foots the bill. Plain and simple.

If your argument is that taxes should be kept low because the government is irresponsible, then why can’t new buyers enjoy the same benefits as you? So shouldn’t you be fighting for eliminating all property taxes?

No, you aren’t because you know full and well that despite the horrendous management of money in our state the extra money that some are paying in property tax is benefiting *you* or your loved ones to some degree.

I AM fighting to end all property taxes. Where have you been? In my answer to Bob b on June 10th, I wrote:

“It’s un-American? The Revolutionary War was fought over taxation without representation! We shouldn’t have ANY kind of property taxes, because as long as you’re paying property taxes to the government, you don’t really own your home. You are just paying rent to the government in order not to have your house taken from you. You stop paying them, and you get a government lien on your house, and eventually thrown out on your ass. Are you serious?”

The U.S. government used to be able to pay all of its bills from tariffs imposed on goods entering the U.S. What happened to that? We got sold down the river.

Proposition 13 was a good thought, but there is no way it could work as intended without limits on government spending, and there’s no way limits on spending can work as long as Fed-driven inflation continues to erode the value of our currency.

No one should be able to tax anyone out of the home they have bought and paid for, no matter what their age or situation. But levying oppressive taxes on commercial and industrial properties is just as destructive, especially to smaller businesses and to owners of small commercial properties, who seem to bear a disproportionate burden, to the point where it scarcely pays to own small commercial properties like strips of storefronts and small warehouses and factories. I’ve seen the tax bills for small storefronts (under 10,000 sq ft) belonging to a friend here in Chicago- the rents he collects just barely cover the expenses. He can only continue to own them because he bought them very cheaply 30 years ago, and I’ve recommended he ditch them while the area is “hot”.

You people don’t get it. You’re more than willing to profit from the increased value of the land yet don’t want to pay the freight for the infrastructure that factor into increasing the value. Save the crocodile tears. Everyone loves a handout.

I don’t mind paying for the infrastructure as long as I know that that’s where the money is going. But unfortunately, most of the money is going into the pockets of our politicians and their corporate buddies, and in particular the banking families that run our country through the Federal Reserve. I’ve known about it all my life (and I mean particulars, not just generically), and I really had my nose rubbed in it during the 30 years I worked for the State. Their highway department, where I worked, is just a giant giveaway program for private contractors and ‘friends of the state’. I was in construction for less than 10 years when I was told that the contractors were ‘our customers’. WTF? Who’s paying the bills? All of our other ‘customers’ are referred to as ‘stakeholders’. Uh-huh. I figured that one out right away.

As an interesting aside, I have mentioned the endless school taxes I and others got hit with in Alameda. As soon as one was passed, some spokesperson from the school district would be interviewed on the local news, and say that the school district was planning their next parcel tax because what they just got was not enough (it was never enough). Well, my sweetie has a daughter who is a teacher in Alameda, and she called him the other day to tell them that the schools are saying they’re broke, and that the teachers’ already pathetic pay was being cut again. What happened to all that money that homeowners shelled out for the nonstop school taxes? It didn’t go to the schools. Heck, the teachers out here are required to buy supplies, like pencils, notebooks, and art supplies, for the kids they teach. What’s with that? That’s why I don’t like paying parcel taxes. It’s just a giant con.

The house next to the house across the street has a for lease sign in the yard. I looked it up and it is going for &2995/Mo. That is for a 1300 sq ft 3 Br 2 Ba nice looking tract house in a lower middle class neighborhood. Great for kids, but that would be 45% of an $80K/yr salary. And no guarantee that after a year the rent wouldn’t be $3500/Mo. Houses here are selling for $600-650K. No wonder we have people leaving the neighborhood for Arizona and Idaho.

If you have enough cash to get your house payment down to around the rent, I’d say you should go for it if you are a parent. Then wait 20 years and hope Prop 13 stays.

Sorry but a rent of 2995 means the neighborhood is not lower middle class. A landlord will also not accept you if rent is over 30% of your household income. The person who rents for 2995 a month would have to make around $108,000 and would be in the top 10% of income earners. Not only is it not a lower class neighborhood it’s an upper class if not wealthy neighborhood.

Yeah, with a Mexican immigrant homeowner with a landscape business and couple of old trucks and a lot of his cousins hanging around. Really, 1300-1600 sq ft houses built 50+ years ago. I’d say it was working class when it was built and got bumped up a notch over the years. No one in our neighborhood makes that kind of money individually that I know of. Newer people may have more money (or more family members working). But this isn’t close to Anaheim Hills or Villa Park in social status. This was my point; that a lower middle class neighborhood would have houses renting for that kind of money. No one is tearing down houses here to build McMansions on these 7700 sq ft lots. So companies trying to bring in mid-level management with salaries that can’t afford anything better than this are going to have trouble recruiting here in N. Orange Co.

My neighbor and I both got postcards with pictures of our houses on them in the mail (his was in my mailbox). The sender didn’t bother to come out to take the pictures. They had old vehicles that aren’t parked in the driveway anymore in them. So I think they were from Google maps. The cards had a number in Corona to call about a cash offer. We both had a good laugh at that one.

I’ve noticed a lot of people posting about payments. As in, as long as your mortgage payment is close to renting, buy. Which is a very narrow way to look at it. A mortgage payment includes principal payments and of course the MID. Take a $500K mortgage at 4%. Payment is $2500. But of that $2500, $720 is principal in month 1. Interest is $1650. At a 30% combined fed/state tax rate, you get back $450 of that. So really that $2500 “payment” is more like $1300.

And yet this is virtually never talked about in the rent vs buy discussion only how much is rent vs how much is the mortgage payment.

Mr landlord subtracting principal pay down is acceptable for buy/rent but you need to add back in property taxes, maintenance, and insurance to the payment. Also you need to subtract the loss of investment income from your down payment. It pushes the 1300 way back above 2500.

You don’t get 30% of your interest back. The new standard deduction is $12,000. You get that whether you itemize or not (speaking of personal residences only, and not investment properties). That means that your only benefit is whatever exceeds $12,000 on your Schedule A total. For instance, in your example, in the first year before the principle is paid down, you have $1650/month in interest x 12 = $19800. That means you only get a write-off of $19,800 – $12,000 = $7,800. 30% of that is $2340, which is a return of only 11.8%. Of course, if you have other write-offs, like state taxes, that will increase your write-off as well. For instance, if you pay $5,000 in state taxes, then your interest write-off benefit jumps from $7,800 to $12,800. BUT if your total write-offs are below $12,000, you get jack back.

Also, if your are in high state and property taxes like California, your local taxes (state and property) are limited to $10K. To qualify for the median home in my area or in southern Cali, your income has to be high enough that you are paying $10K or more in income taxes. That same home will cost you at least $10K in property taxes. But you can’t write off more than 10K total, so you’re screwed there as well.

My point exactly. You get that 24K whether you pay mortgage interest or not. In other words, your write-offs no longer pay off as a partial return of your taxes. You get no break anymore, unless your Schedule A deductions exceed $24K.

Karin, so you mastered this 24k deduction thing. Great for you.
Please consider that:
->Many homeowners are not married, so they are only 12k in deduction
->Yes, mortgage write off advantage shrunk, BUT overall everyone will get more money in their pocket. You, like extra 500$/month is equivalent in additional ~100k worth of mortgage one can take upon.

Very few actually make a decision to buy because of tax write off. But most will use it as justification once the purhcase is made

Surge~
I know an awful lot of people with high incomes that bought a house “because I need a write-off”. That’s also one of the big selling points that realtors push.

As for $12K or $24K, a lot of single AND married people are going to lose their interest write-off. So what if the tax rates are lowered? Your mortgage interest payments will not likely give you a tax break, so you pay the whole freight. However, any interest you make at the bank (which is a fraction of what you’ll be charged for a loan) WILL be taxed. You’re screwed on both ends.

Read what I wrote again. I said with OR WITHOUT a mortgage my deductions exceed $24K. Which means a mortgage for me is beneficial since I’m already at $24K and 100% of the interest is deductible for me since it is above the standard threshold.

I realize I’m in a minority here and most people don’t have $24K in deductions sans mortgage. For working stiffs on a W2, the standard deduction doubling will be really beneficial.

Gotcha. But you admit you’re in the minority, and most others will not be able to write off 100% of their interest.

As for the standard deduction doubling, that’s not quite true. The 2017 standard was $6350. On top of that, they took away your personal exemption of $4050 and rolled it into the $12,000. So what you got was $6350 + $4050 = $10,400 swapped for $12K, an increase of only $1600.

So what does that mean for the average taxpayer? It means that last year, anything over $6350 on your Schedule A got you extra money back (you get the $4050 no matter what, excluding very special and rare circumstances). But this year, you have to have over $12,000 in deductions on your Schedule A to get any benefit from your write-offs. That’s a difference of $5650 in write-offs, which probably cancels out your lowered tax rate.

1) Homeowners, young or old, are more likely to vote than renters. Also, there are renters saving to be owners, even if it is a 2 Br Condo. And they will vote more than their less ambitious fellow renters.

2) We saw in Seattle’s head tax for employers debacle that big business can REALLY turn the screws on governments that single them out for a new onerous tax. Workers for S-Bucks and the Jungle Boat Cruise don’t want their jobs shipped to Texas or even Redmond. So any attempt to repeal Prop 13 for commercial property will have a much bigger war chest than repealing it on homes only. I personally feel that the Left will try first to repeal it on commercial property, and the combined might of big business and the government bloodsuckers on the take will crush it. But I could be wrong.

3) Prop 13 is California’s only really successful program for economic stimulation that doesn’t steal from the taxpayers to help a politically powerful industry.

Prop 13 doesn’t steal from anyone. It lets some people get ripped off less by the Government than others, for sure, but it allows the newer owners to get on the train with a fixed fare that won’t go up unexpectedly as you move down the track. It allows owners to do long term planning, and you don’t have to buy a place if you don’t want to. You can move to Wisconsin and freeze with property tax rates considerably higher than here.

The Seattle reference was not intended to be a comparison of like for like. It was an illustration of the power of mega-corporations to squash a tax that gets in their way. We have big corporations here just as in Seattle. I don’t see how you could miss that.

The 2nd great wealth transfer is coming soon. After the powers that be (TPTB) again crash the real estate market, they will buy homes from middle class, occupied homeowners who face foreclosure during 2019-2021 recession. Cash buyers will buy everything cheap while the middle class buyers are denied loans to buy at the bottom. Within 10 years, the U.S. will end up being a country of renters, and the top 1% will own about half of all homes in the country.

I think the Millennial Generation is split between the extremely fortunate and unfortunate.
They were born between 1981 and 1997.

When the housing was a rock bottom and prices were half-off in 2010, the early Millennials born between 1981 and 1986 (24-29 yo) were able to purchase at a tremendous bargain.

They also saw their late-boomer and early Gen-X parents foreclose at record amounts.

I think Our Millennial was a late-comer and was born too late to buy in at half off even though at maybe 20 years old, he knew what the home prices were in 2010. That makes him and the late Millennials unfortunate to miss this boat. I admire them to have the restraint to not impulse buy when home prices were rising at a ridiculous rate.

They were old enough to see and understand the first bubble and subsequent crash but too young to cash in on the half-off sale.

After witnessing, the 2008, bubble, I’d be hesitant to buy now also. Burn everyone once and learn, Burn me the second time around and I am a fool.

I feel the same way about Bitcoin.

Of course, housing is a long term investment. Starting a 30 year mortgage when you are over 35 means that at retirement age, you will still have a mortgage.
I suspect that is why Our Millennial is so cranky. The pressure is on.

If only Our Millennial would stop ranting about Prop 13. He would then have my complete admiration and condolences for the way the economy is now and his predicament.

Bob,
Yep, most millennials did not buy during the last crash. Too young, but every generation will get buying opportunities. The economy crashes roughly every ten years. Dot com bubble, housing bubble, everything bubble. As you said, seeing how previous generations got screwed by the last bubble was eye opening. 7 mio foreclosures. Most people are not that dumb to buy high. You just wait until the market is correcting (55-75%) is a given in California.

Prop13 hasn’t gotten enough attention yet. Most younger generations haven’t looked into buying (they are turned off by the overpriced market). Once they look into it they will understand how prop13 benefits older generations (government subsidies) and screws younger generations. If prop13 falls, house prices in California will collapse too. Once younger generations understand that – lights out for the freeloaders.

Few people actually hold on to a house for 30 years so it’s moot how old you are. Essentially mortgage is like rent for most people. But with a tax deduction and equity payback. The typical person moves every 7 years, so pay off 7 years worth of mortgage. And the house appreciates. So for example buy for $500K, pay $50K of the mortgage, sell for $600K, you have $150K “profit”. Then take that $150K as downpayment for a $750K house, pay off $50K of the new mortgage, make another $100K in appreciation the next 7 years. Do that 3 or 4 times in your life and you end up with a good chunk of cash at retirement without ever paying off a mortgage in full.

People wanting a repeal of prop 13 are just plain mean spirited people. They want to see old people thrown out of their homes because they can’t pay excessive taxes. They like the idea of forcing old people from their long term homes so they can get into a property for a fire sale price. Just mean spirited. When my kids grow up, I hope they do not share such mean spirited views.

Nah JT,
I don’t think they are mean, they just want fairness. Why should some people receive subsidies and others (younger buyer) pay an arm and a leg to finance it?

Think about a boomer and a millennial. Both drive the same Honda Pilot. The boomer bought it new for 15k. The millennial buys the Honda 20 Year’s later for 50k. The registration cost for the boomer is 150 and the millennial has to pay 500. Same car.

It’s logical that the millennial only wants to pay 150 or wants the boomer to pay 500 as well?

Are you serious? Where is your humanity? I’m with jt. His is the best argument for Prop 13.

When I sold my house at a large profit in 2005, I took a huge chunk of it and sent checks to my favorite charities (animal rescue groups). I inherited a house a few years after I sold mine, and I did the same with those profits. I continue to send all of these groups checks twice a year, and those are the checks I most enjoy writing. I’ve also asked my relatives, instead of Xmas gifts, to donate money to these charities. I have been very fortunate where others have not, and I couldn’t sleep at night if I didn’t use my good fortune to help others.

“People wanting a repeal of prop 13 are just plain mean spirited people. They want to see old people thrown out of their homes because they can’t pay excessive taxes. They like the idea of forcing old people from their long term homes so they can get into a property for a fire sale price. Just mean spirited.”

Read Millenial’s posts. He has specifically written that he wants old people thrown out of their houses, since they have no right to pay less than more recent buyers do in property taxes. Of course that is mean-spirited. Prop 13 was a tax rebellion, precisely BECAUSE older people were losing their homes before it passed. California house prices were rising beyond people’s income capability. They weren’t investors who were making money. They were folks who wanted to stay in the homes they’d bought and paid for and paid taxes on all their lives. WTF is wrong with you anti-Prop 13 people? And again, I have no dog in the fight since I don’t own a house anymore. As I stated before, even with Prop 13 ‘protection’, I was going through my savings to pay the non-stop added parcel taxes and bond measures on my house. I finally had enough of it, and went back to renting.

Karin, you are right about prop13.
but, you are absolutely wrong about selling your home because you dipped into savings to pay a $100/month increase in prop tax? Come on!
By “saving” 100/month (on top of massive capital gain), you are exposed to wild fluctuations in rent.

I challenge your assertion that Prop 13 was truly about old people. That’s just propaganda its campaigners used to promote the idea. It was based on a reaction to runaway house price inflation of the time, which was primarily created at the nexus of the Federal Reserve’s printing press and anti-growth policies enacted in Sacramento.

As has been proven now over the past 40 years, Prop 13 has solved none of those problems. In fact, it contributes to even more house price inflation through disincentivizing the disposal of benefitted properties which would otherwise provide added supply.

It creates a tax on those who don’t enjoy the subsidy because Sacramento has raised other taxes and fees in order to make up the difference. Notice that the “cruelty” of said tax doesn’t get fair mention. It’s because critical thinking is required in order to recognize it, and it doesn’t take much thought to adopt a talking point.

I rail against Prop 13 because government welfare programs tend to do more harm than good, although I do appreciate that beneficiaries of government subsidies prefer maintaining the status quo. Grandma will be fine, there are already other programs on the books that will allow her to defer property taxes until death.

Karin,
“Read Millenial’s posts. He has specifically written that he wants old people thrown out of their houses, since they have no right to pay less than more recent buyers do in property taxes.”

This is worded a bit negative.
I am saying boomers should start paying their fair shares. They profited from the housing bubble and sit on highly inflated house values. We have to pay 1.2% of the inflated value in taxes. Why should a millennial pays thousands of dollars more in taxes for less house and same services? Why does the government subsidieses boomers but not younger buyers? We have to finance this scam.

Have boomers pay their fair share or lower taxes for new buyers. If boomer would have to start paying their fair share they will downsize (which they should). All of a sudden you have a shift in the market and prices will come down (which they should).

There is a name for this. Taco Tuesday boomers. They can afford the house they live in and pay next to nothing in property taxes. They can’t afford to go out and eat an expense meal so they go get taco Tuesday and tell millennials to buy now to keep their inflated house values up. On paper they are millionaires.

You are blinded by your hate for younger generations. Potentially because you had no kids.

I am not saying throw them out. I am saying don’t be cowards and hide behind the poor grandma argument. Be honest, u love government subsidies as long you are the beneficiary.

I was a pre-teen at the time Prop 13 passed in 1978 but I read the papers and had at least one civics class in school.

California was much poorer (reasonable) back then. My parents sold a house in the Midwest and bought a same size house in 1975 in coastal CA for the same price. Kind of hard to believe.

1) It was true that seniors were being forced out of their houses due to high taxes.

2) CA property taxes were at 3% of assessed value which was one of the highest in the US at the time.

3) The Original Tea Party saw an opening and proposed draconian measures to fix this.

a) Slash from 3% and Cap the tax at 1%. — Most agreed with this.
b) Roll back the property assessments 2 years because housing assessments were
increasing drastically. Most agreed with this.

Keep in mind this was driven by both increasing home values and also seniors being forced out of their homes.

Then the Tea Party slipped in:

1) Assessments and taxes could not rise more that 2% per year. – Bad decision.
Inflation was 8+% during the Carter and Reagan eras. CA could not keep up. Education
funding faltered. However Social Security did rise with inflation. Non-seniors who were
on the rising COLA based wage curve made out like bandits. These were Silent
Generation and early Boomers. All of my elementary school teachers were laid off and
class sizes grew from 15 to 30+

2) The tax basis is inheritable – Another bad decision.
What are we? This is even worse than feudal Europe. Why should someone’s house
purchased in the 1970’s maintain the same tax basis for multiple generations?

That is my memory of the time.

I would never vote for the Tea Party because they sound too much like Jarvis and Gann.

Regarding Prop 13, old people were the primary victims, if not the only ones. This proposition passed when I was 22, and I was there when this was going on. I knew old people that could barely buy food because of their property tax increases, and some had to sell their houses and leave communities they’d lived in for most of their lives. It was pretty sad.

Having said that, you make an excellent point about 13:

“It creates a tax on those who don’t enjoy the subsidy because Sacramento has raised other taxes and fees in order to make up the difference.”

However, as happened to me, those taxes hit everyone, including those who’ve owned their homes for years. No one has been exempt.

And speaking of which, this is to Surge – I agree that rent fluctuation is a dangerous wild card, which I was also subjected to after I sold. However, it wasn’t a question of saving $100/month. I would have run out of money in a year’s time, and the tax increases were relentless. Plus, when I clearly saw that the market was topping, I figured it was a great time to bail anyway. In the long run, I came out ahead because I invested the money in something else that went sky high, and made more than what I would have if I’d kept that house.

“I would be happy if older people can’t afford to live in their big houses due to paying their fair share in property taxes….than they would finally downsize!”

Your words, not mine. And how am I blinded by a hate for younger generations just because I don’t want my property taxes raised so high that I can’t afford to stay in my home? What does one have to do with the other? Read what you wrote above. It seems more like you’re blinded by your hate of old people.

As for the government subsidizing me, I think not. Frankly, I’m paying out more than I’m getting back from the government, so I’m the one doing the subsidizing.

Yep, Brown has vision. He was governor of California in the 70s, and he ended up laying off State highway engineers with up to 14 years of working for the State. That was a vast source of knowledge and experience that the State lost and never replaced, and is why we have some of the worst roads in the entire nation. In my district (the 9-county Bay Area), we’re run mostly by the Iranians, and secondly by favored minority groups like the LGBT, blacks, Mexicans, etc. Their main focus is diversity in the workplace, and we have endless training, celebrations, and workshops revolving around this (I went to one, and then refused to go to any more once I found out that these were not mandatory, which they don’t tell anyone). No one gave a crap about fixing the roads, let alone upgrading them.

Speaking of Brown, we had a city contractor show up at our door at 8:45 yesterday morning. He told us that meters were being installed so that our water useage could be remotely read. I asked if this was part of Jerry Brown’s future water restrictions, and he said ‘yes’.

Yup, Brown and his vision. The exodus from this State is about to accelerate.

Karin, no wonder your salary as engineer was frozen
They are installing wireless connection for the meters, so guys do not have to druve around. It is kind of like here, you can just type your insane comments here, instead of snail mailing it to us

What I am saying, these are remote readers. So, meter readings can be done remotely (wirelessly), instead of people wasting time and driving around to check them manually. Has nothing to do with any water restrictions, just optimized way to collect water meter info.

I am surprised that as an engineer you failed to understand this simple concept. This tells me you are not talented and probably was useless in your job.

How will the private Federal Reserve’s hiking interest rates from near nothing affect the bond market and the Mortgage Rates?
Even less affordability?
ARMs adjusting?
Finally the working poor can make a few cents on savings without betting on the stock market, assuming they have anything left to save after hyper-inflated living costs.

Rates have stabilized after the large run up over the past 6mos.
Very very small % of buyers have taken out ARMS in the past 10yrs, it is nothing like the previous run up. I have written exactly 2 ARM loans in the past decade. In each case a 30yr was not an option bc they were nonQM, but, both had great credit and 25% equity position with low DTIs. Sorry, no ARMaggeddom coming your way.

My husband and I are looking into purchasing a home right now. We have the pre-qualifications, we have the lender and realtor ready to go but the market is so overpriced it makes us very hesitant. I just can’t fathom paying $500k for a crappy outdated house in the inland empire. We both work in Orange County and rent a condo in Anaheim Hills. Our only option to buy is in Corona or further out. We can’t afford anything in OC. Well..I take that back, we can afford OC but we don’t want to live in the ghetto and we don’t want to spend $500k to live in a small condo with no yard. We are already paying $2000 for a 3 bedroom condo in a nice community near Yorba Linda, so why commute 1+ more each way to buy a house in the Inland Empire? I just don’t know if I want to do that.

Dan, I am not changing my mind about when the real estate top will start. It appears to be happening right now. I just wonder whether the powers that be (TPTB) will try to delay it until after the mid-term elections.

There is sudden flood of homes for sale in my Mission Viejo neighborhood and in other ones which I follow. There are 2 to 3 times more for homes for sale here than there were 1 year ago.

In my cul de sac street of 35 homes, there are currently 4 homes for sale. And I am seriously thinking of joining them and selling my primary residence after 28 year. I never even considered selling my own home until now. If I join the crowd. That will mean that 1 in every 7

In a Mission Viejo neighborhood where I recently sold one of investment homes, there are now 57 homes for sale. Normally there are only 20 to 30 homes for sale there.

Dan, I am not changing my mind about when the real estate top will start. It certainly appears to be happening right now. I just wonder whether the powers that be (TPTB) may try to delay it until after the mid-term elections.

By the way, there has been a sudden flood of homes for sale in my Mission Viejo neighborhood and in other ones which I follow. There are 2 to 3 times more for homes for sale here than there were 1 year ago.

In my cul de sac street of 35 homes, there are currently 4 homes for sale. And I am seriously thinking of joining them and selling my primary residence after 28 year. I never even considered selling my own home until now. If I join the crowd. That will mean that 1 in every 7 on my street are for sale.

In another Mission Viejo neighborhood, where I recently sold an investment property, there are now 57 homes for sale. Normally there are only 20 to 30 homes for sale there. The asking prices are still very high, but can they stay there with s such a sudden increase in supply.

$2,000/month to rent a 3 bed condo in a nice area sounds like a bargain to me. Stay were you are and hope for a real estate crash. However, I am no longer sure the crash will start this year. The crash may be delayed until next year. The powers that be (TPTB) seem to want to keep the bubble going until after the mid-term elections and keep interest rates where they are now. I am beginning to suspect that the real estate price top may be delayed until Spring 2019 which means the bottom is not going to occur until 2021-23. You will need a lot of patience to wait! I hope you and your husband are young.

Hope is not a real plan. We wouldn’t suggest to a starving person to wait for a coming harvest in order to feed one’s self. We would suggest them to seek out food where it is already made available. As such, the answer for individuals in this situation is to take action by relocating to a locale that provides a better balance of quality and cost. Of course it’s also possible that starving is a preferable choice to some individuals.

So if I understand your logic, TPTB – who universally loathe Trump – want to keep the bubble going until AFTE the mid-terms in order to help Republicans? Come on bro. That’s the most insane thing I’ve ever heard.

Racoomes, buying further out will not help. The homes in Riverside Co. will drop more (about 50%) than those in Orange Co. (about 35%) during the next downturn. Foreign buyers will help to support home prices in Orange Co.

Mr. Landlord, a sharp decline in home prices is a certainty–not wishful thinking. The exact timing is the only question unknown. The top will occur soon either in fall 2018 or in spring 2019.

TPTB hate Trump–not the Republican Party. Timing the next recession to start in late 2019 or early 2020 is perfect timing for them. They don’t want the Republicans to lose the mid-term elections by having the next recession start too soon.

Pretty funny now that you are stating it will be spring of next year at the earliest because just six months ago you were claiming it would be the fall of 2018 and now you are changing your tune just like every single permabear has done over the past 7 to 9 years.

It’s always next quarter, next year, next decade etc…..

After awhile they started disappearing, I mean you can only be wrong so many times before it becomes embarrassing. I will hand it to you though, at least you had the stones to pick a date unlike delusional millennial who is waiting till next decade and beyond to buy or inherit. Hope it doesn’t get too the point where he is seen on Dateline in a Menendez type story.

In any case desirable parts of the state are still in very high demand, and no matter what China does with capital controls, the money flows.

“After awhile they started disappearing, I mean you can only be wrong so many times before it becomes embarrassing. I will hand it to you though, at least you had the stones to pick a date unlike delusional millennial who is waiting till next decade and beyond to buy or inherit. Hope it doesn’t get too the point where he is seen on Dateline in a Menendez type story.”

Couldn’t have said it better myself Dan. The Permabears either change their blog handle or just disappear for good (likely after buying a house). Many likely gave into family or spouse pressure, it’s either buy or bye. As I’ve said umpteen times, if you can comfortably afford a house and have a long term horizon…it makes sense to buy. Hoping, wishing, praying for events completely out of your control is a BAD house buying strategy. It will be YEARS before the next tank presents itself. In the meantime, population will increase, people will start families, money will flow into socal from around the world, etc.

Danny,
Nobody wants to buy at over-inflated prices. Once the market corrects (55-75%) millennials will have the appetite to look at open houses! Until then it’s more fund to eat popcorn and watch buyers at the peak get screwed!

Gary wrote that “The top will occur soon either in fall 2018 or in spring 2019”.

You write: “Pretty funny now that you are stating it will be spring of next year at the earliest because just six months ago you were claiming it would be the fall of 2018 and now you are changing your tune just like every single permabear has done over the past 7 to 9 years.”

He didn’t change his tune at all – he again wrote that it could start in fall 2018. Pay attention. Plus, Dan’s prediction is a heckuva lot more precise than the self-claimed genius Millennial, who can’t do better than a 5 year horizon.

@Raccoomes how long do you plan on living there? this is a key factor in deciding on whether or not to buy. Any chance you or spouse could lose their job and need to take a job 50 miles from where you intend to buy? Lots of factors other than simply where we are in the cycle to simply base a decision on when prices will go down. Some say, in 2020, some say by 2025…. nobody knows WHEN or HOW MUCH prices will drop or for what duration. And when they do drop, -all-cash investors will swoop in like they did in 2012 and gobble up all the good deals.

here is the best Rent vs Buy calculator I have run across.
I purchased in 2012 which of course was a good time but did I know it then? no, however, I knew I would live in WLA for the rest of my life, so, who cares what happens to home prices???

Been there, done that. And IF….and that is a big if…..the government stops bailing out bad decision makers and bankers you very well could be upside down for a decade or more.

I bought in 1991 in a nice little hood in corona for $177K
was upside down until 2001
the hood took a massive dump, we no longer spoke the language.
sold in 2005 for $450K …nice little profit but the x got all that back in child support.
I just checked zillow the other day. that houses value bottomed in 2013 at $195K
it’s back on the market for $425K

Of course it makes no sense to buy something shitty, far away to work.
I would save more and buy something more location, even if it means going for a more expensive place. You want to be happy, fuck the $$$

It’s an old chiche, but it’s a cliche because it is always applicable. Real estate is all about LOCATION LOCATION LOCATION. Buying in a shitty location is not a good idea, whether in a bubble, in a crash, or whenever. You always want the cheapest house in the most expensive neighborhood. Never the other way around. When a downturn comes, the shithole areas will be slaughtered. Think about who buys in Corona (and places like it). People who use 0% down, govt assistance type mortgages. They are stretching to make that mortgage. At the slightest sign of trouble these people will be the first ones to walk away from a mortgage or take in roommates or airbnb their houses. In other words, the ‘hood will deteriorate quickly. And given 50%+ of your neighbors will not be US citizens, they literally have no incentive to even make an effort. There are no consequences to them for walking away whatsoever.And then you get into a spiral where values drop, more people walk away, causing values to drop more, etc etc.

That’s not to say that nice areas won’t experience price declines ever. But a nice OC ‘hood will not spiral out of control the same way a Corona ‘hood will.

I’m a real estate bull, but even I recommend you wait for a recession. The quandary is not so much that prices are high, but not knowing if prices and rents will continue rising over the next several years, and perhaps stagnate for years after that – making you regret not buying now. The problem in your case is you would be buying something you’re not happy with and would potentially be tough to rent out when the time came. You can’t really lose by continuing to rent. Condos do not have as good of an ROI as SFRs, and an SFR rental in a bad area will just add stress to your life. Something else to keep in mind is that an hour+ commute costs more than money, although that can be $5-10k/year in gas and car depreciation. Your time is valuable.

The trick is knowing when to pull the trigger after prices are dropping. You won’t know where the bottom is (“buy the dip” is a great concept that only works in hindsight), so don’t wait for it. Once prices are down ~25-30%, start looking in earnest so you can see what the competition is doing. You want to buy when investors are still timid – because once they aren’t anymore, it will ramp up to the point where getting a great floor plan/lot is nearly impossible due to multiple all-cash offers over asking. It happens fast – 2009 was a bloodbath for the 20% down people. And don’t be afraid to make offers significantly over asking if you see a house that clicks with you – 5% over on a house that’s already discounted 40% is still a great deal.

Get something that will be attractive as a rental, whether or not you currently plan on renting it out. No major streets nearby, good schools, etc.

Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “the time to buy is when there’s blood in the streets.” He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.

So, not like your payment is bigly above your current rent and you get a house vs a condo. If it’s the right fit for your family go for it. If you’re just buying to buy, I would say no, but if it works for the family and your gonna stable, pull the trigger.

“Tyler Durden” writes using a pseudonym for a reason. They (there’s more than one of them) only write for sensationalism and page views. They twist the truth, and when that isn’t good enough, they flat out lie.

“In light of the above, it is not surprising that the average sales price dipped 6% year over year in May, which however was not nearly as bad as April when year over year declines registered a head turning 11% decline.”

Clever. Arrange the sentence in such a way that the reader who isn’t paying much attention doesn’t notice that the YOY sales price numbers are actually increasing.

“In other words, there is a surge in unregulated, non-bank lending…”

Less regulated, not unregulated. Those private Canadian lenders deal in short term, high interest loans, and use strict LTV guidelines (frequently 80/20) so a down payment is required. Their clients are employed and may have questionable credit, but won’t get the money unless they prove they can pay it back. There is no Fannie Mae equivalent to dump a 3-year loan on.

Unemployment claims ***UNEXPECTEDLY*** dropped again this week. Amazing how every bit of economic good news is “unexpected” by the media. The economy is on fire, using any metric you want. Unemployment is at record lows, home prices at record highs, median income record highs, manufacturing at 20 year highs. One items that has – of course – received zero mention in the MSM is the yuuuuge drop in food stamp recipients. Over 1M fewer people on food stamps today than January 2017.

We’ll hit another recession at some point. But it isn’t happening any time soon, nor is the 75% housing fire sale perma bears keep wishing for.

Based on history, socal housing markets only tank during big job loss recessions. Unemployment right now is the lowest in almost 20 years. People who want a job can get one, people are spending money on the usual frivolous BS, consumer confidence is sky high. The recession will come one day and home prices will drop. Unfortunately that buying opportunity is YEARS away. These are the cold, hard facts.

Starting a renovation loan for a client and I referred him over to the contractor that renovated my property and upon talking to him for a little while he mentioned his so busy that he cannot find enough guys for his crew. When he needs extra guys he would drive down to Home Depot or a gas station / U-Haul area where labor guys would hang out looking for work. So he tells me the number of guys hanging out there now is way down and their daily work rates are way up.

That’s the first thing I mentioned when I started posting at this site – the $10K cap on state and local (property) taxes are going to do in house prices in states like CA & NY. Already in Sonoma County, I’m seeing the type of house and lot that sold for $725-$775K at the turn of the year list for $625-$700K. Plus, almost no houses for the last few months are hitting the market with dated kitchens, which was the opposite of what was going on just 4-5 months ago.

Many here ask how all these buyers come up with the down payment whether it’s 100 150 or 200 thousand, and for those that have not saved up all that money typically it comes in the form of a gift from their parents.

Prices are high yes however a two-income household can easily afford a monthly payment of 3K to 4k.

So buying 600k to 800k, with the down payment as a gift is how many get in, for those wondering how people save so much cash.

Even more ask: why do we have historic low sales numbers and why are there so many realtards looking for another job? The answer is simple. House prices are massively overpriced. Millennials don’t buy at the peak and houses are sitting on the market for too long.
Quick side story: I talked to a real estate agent just recently. The purpose of him getting into RE was to sell his own house. As many know, transactions costs are extremely high with real estate sales. Huge rip-off! Thousands of dollars just out the door? Yes! Just for printing some paper, cheap sales pitches and a couple of emails. This guy had a good strategy. Get your license, sell your own home, save thousands, sell at the peak of the market, rent until the market crashes and buy st a discount. He is smart so he probably knows as well the market will correct by at least 55%.

The only issue was that nobody was willing to buy his overpriced home! I am not surprised I told him. Many millennials don’t even talk about the interest in buying. Why move out from mom and dads and waste your hard earned money? Just wait for the crash!

If you put 500K in a brainless index fund in 2008, the market went up 300% under Obama so a Millennial or their parents now have $1.5M.

It you put 500K in a brainless index fund in 2016 when Trump was elected, the market went up 30% in one year and you have an extra $150K for a downpayment.

There is a lot of downpayment money sloshing in the stock bubble market.

I’d be afraid to be in either market now. Both are bubbles but at least if you balance your investments to both stocks and real estate, it is a smarter move. Cash is still only paying 2% in CDs and inflation is higher than 2% while the market paid 30% under Trump.

The market return has become flat since January so people are pulling their 300% , million dollar gains out to diversify.

It sux that it takes 2 high-middle incomes to scrape together the mortgage payment on a 50 year old cottage that was built for working-class people back in the day, and was supported comfortably with one blue-collar income then.

I don’t know anybody that makes over $100,00/year and the only people I know that are lucky enough to have houses only got them because mommy and daddy basically made homeownership happen for them through outright purchases, crazy down payments, inheritance, and usually a combination of all 3.
Where is this vast millions of born post 1980 people making $100,000+/year? Buying homes all on their own no mommy/daddy involved?
What do these millions of people do for a living?
Only people I know of personally that have homes couldn’t even afford the rent I pay!

Reality,
This blog is infested by realtards, RE cheerleaders and lenders. Realtards and lenders are here due to historic low sales. They got nothing better to do than spread a fake reality where everybody who buys a house magically gets rich and sits in the pool drinking beer all day. Some even tell you they retired at the age of 45 just because of real estate. Most of what these individuals say is utter BS:
“Buynow or be priced out forever”
“Rental parity is paying down 200k plus 1500 more a month than a renter”
“Be a man, take the risk and buy now”
“We have low inventory”
“There are thousands of mysterious Asians with buckets of cash ready to buy”
“Interest rates will never go up in our lifetimes”
“Price does not matter”

As the bubble progresses (showing no signs of buyer interest) the comments by these people get wilder and crazier. It’s comedy at its finest. Enjoy the blog and don’t believe a word these desperate people post here.

When homes drop by 60% and you come in with cash…say you buy a now million dollar home for a 400k? Cash.
So, you pay $400k outright? You are fucking crazy, you could have paid only 4k for that month. Where is your rental parity?

Surge,
Yep, that house at 60% discount would be worth buying because at that discount it would be at rental parity. Right now, houses are overpriced. It’s much better to wait until prices correct to where they should be 55-75%.

If that happens I am willing to buy in all cash. That’s not crazy it’s wise and being financially responsible. Crazy would be to buy at the peak (now). But most people are not that crazy.

Let me know if you have further questions or concerns. Always happy to help!

Surge!
“Not even with 90% crash you would not be at rental parity.”
Thank you!! I have to save this cookie! Just when I thought I can’t get any more great lines out of you you kill it again!you are truly a treasure!

I’m kind of the opposite. Unfortunately the vast majority of the people that I know do not make less than 100k! One of my best friends had his 40th birthday this weekend and we went out in LA. Dinner, table, drinks, the night cost him 5k. He is a CPA and makes 1/2mil.

Out of the 12 people at the dinner table I believe there was one that made less than 100k and that is only because she is a hot blond gold digger.

Every single one owns property with some owning multiple. There are a lot of people out there that Maggie and have a lot of money. Those that are not “high earners” can still get in the game with help from the parents.

I just took a new application this morning from a buyer looking to buy around 450 to 500k range. He is doing 10% down and will probably get a gift of around 20K from the parents to complete the down and for closing costs. Parents sent over their bank statement and they have 300K in the bank. Yes at that price point he will look in the Inland Empire but as I said there are plenty of people that make tons of money that have their own down payments and then there are people that make decent money who can afford the payment but do not have the down unless it is coming from family, and that family does have a lot of money saved. There are lots of retired Boomers that have six figures in the bank and are willing to help their kids get into the market.

“I don’t know anybody that makes over $100,00/year and the only people I know that are lucky enough to have houses only got them because mommy and daddy basically made homeownership happen for them through outright purchases, crazy down payments, inheritance, and usually a combination of all 3.”

I don’t know a single person who had help to buy their first home. For some reason 20-somethings have an expectation that they should be making six figures. It’s definitely possible (I know a few), but life happens – kids, health issues, divorce, bad choices. There is power in marriage. Most of the people I know make close to $200k as a household, but we’re also all in our 40’s. It’s hard not to eventually end up making decent money unless you choose to remain in a career that has no path to that kind of pay, or stay at a tightwad company for 20 years. I’ve seen a receptionist work her way up to VP in the right company, but it took 15 years. It’s also relative – $60k as an individual in the inland empire is not exactly chump change, and neither is $40k in flyover country. Put two of those together in either place and you’re doing well as a couple, as long as you don’t make bad choices a habit.

“Where is this vast millions of born post 1980 people making $100,000+/year? Buying homes all on their own no mommy/daddy involved? What do these millions of people do for a living?”

Software, engineering, medical, middle management, business development (sales), city employees/contractors. I’ve known people who were mentally challenged but were successful because they made the right career choices. Millie, for example. Another went to dental school and has a good work ethic, and those two things alone means he’s wealthy today.

This reminded me of a couple we know who work at the same community college. One is in a director position (although he doesn’t actually direct anyone other than students) and has a series of useless degrees including liberal arts and philosophy. The other is a secretary. Boom, $200k combined. It’s ridiculous, but hey, if someone is willing to pay you stupid amounts of money for work that should pay half as much, you don’t argue.

My advice for 20-somethings is to get a mid-sized city government job even if it’s doing mindless admin work for spare change. Be relentless about going after the internal transfers, don’t screw up, and you’ll end up doing very well.

You need to meet new people. Seriously man, if you live in SoCal and don’t know anyone who makes $100K, you’re hanging out with losers. In coastal cities $100K is barely middle class.

My first job out of college in the late 90s paid $60K a year, which is the equivalent of $90K today. A friend of mine from college started out at $70K which is over $100K today. Granted I graduated from a top tier college with a business degree and entered the job market at the peak of the tech boom. But still, most of my high school friends that I kept in touch with also got great jobs straight out of college, even the ones who went to 2nd tier schools. And 20 years later we’re all doing very well in life. I can’t think of anyone who rents their primary home. Plenty have rental properties and/or vacation rentals. But off the top of my head I don’t know anyone who doesn’t own at least 1 property.

They key thing for all of us was a focus on education and the drive to succeed. I never heard anyone whine about boomers or Trump (Clinton at the time) or racism or sexism or getting triggered or any of the garbage 20-somethings whine about today. You made your own success through hard work. You put in the 60, 70 or 80 hour weeks to get that promotion. You didn’t whine that your boss made you feel sad because he said something mean.

Stop blaming everyone else on your pathetic life and focus on making your life better. Trust me, it will have amazing results for you.

This May was the first May in many years that the number of homes for sale in Southern California was up year over year. As I mentioned in a previous message, I can see this happening in Mission Viejo where I live. On the street where I live, 1 out of every 7 homes is either in escrow or for sale. I have never before seen such a high percentage of homes with for sale signs–accept in 1990. However, I have yet to see any significant reduction in selling prices accept for one of the homes in escrow which sold for 4% less than its original asking price.

Yesterday, I decided to try to sell my primary residence by myself. On Sunday, I put up a for sale by owner sign and had an open house. 5 couples came to look at it. By the end of the day, I got an offer. I am still negotiating with that couple, but so far there has been no agreement on a price.

By point is that the real estate market appears to be much stronger than it was in 2006 and 2007 when the last bubble top occurred. Perhaps, this bubble is different, and it will keep going longer than we think or perhaps the decline will just start more suddenly than it did last time.

Personally, I don’t care if my home sells or not. I just thought I would sell and rent if a reasonable offer comes my way. The thought of renting doesn’t really appeal to me, but it is probably the wise thing to do instead of watching your home drop hundreds of dollars in coming years.

My buyers are having trouble with their home’s appraisal. They may lose their buyer which means I may lose my mine. Selling real estate is never easy, but I am still hopeful. So far, everyone who has shown an interest in my home has been a professional with a PhD. Apparently, the average, middle class buyer has been priced out of the real estate market in Mission Viejo.

A week ago on this exact same article you said that there are for sale properties everywhere in Mission Viejo and 7% on your street or something to that effect where inventory is significantly higher. Now one week later you put your house on the market as a for sale by owner not even on the MLS have an open house with interest and one day on the market already receive an offer! I don’t know Gary it kind of sounds like there is buyer demand and it seems like if there were so many properties for sale on your street and in your neighborhood you wouldn’t get an offer on the same day your property went on the market.

What are your thoughts?

Care to share the approximate price range you have it listed at?

Furthermore you stated that all five of the couples were professionals which to me sounds like they can afford to purchase your property and make good money which doesn’t jive with a lot of the Perma Bears on this site that say they don’t know anybody that makes more than 50 to 100 thousand per year.

As I have said before you really have shown courage to put your money or property where your mouth is and I think you are getting a taste of a strong buyer demand what are your thoughts on all of this?

So… counter a housing inventory comment with a link to a page about apartment construction and occupancy, which has nothing to do with housing inventory, but which actually disputes everything you ever said about rents. Clever.

John,
Yep! The article reflects how supply exceeds demand. Multi family homes, apartments are popping up like weeds. I see many newly built complexes on my way to work. One of the reasons why rents are not increasing. It’s just demand and supply.
I can explain on a hopefully easy to understand example: say I have a room Available for rent and you also have one available for rent (supply). If surge is the only one looking for a room (demand) he can choose between you and me. He could even say to me, hey Millie, John is renting a room for 500, you are asking 550. If you lower it I will move in your place. You are fun and entertaining. I will be forced to lower my rent if I want surge. Of course that’s what I would want to do. Nobody has better re cheerleaders lines than surge. (“Price does not matter”,”your down payment pulls in 10%”,”principal is paying yourself”,”if the market crashes by 90 % it’s still not rental parity”).
Makes sense?

Same old tired lines coming from you it’s amazing that you are so delusional and such a fanatic that there isn’t one shred of ability to step away and consider other data other viewpoints other anecdotal experiences nothing.

98% of the posters on here are reasonable and engage in healthy debate and many just want to be able to purchase a home for themselves however you are living in a separate fantasy land and I think that’s why many have stopped responding to your posts.

I can sit here all day and tell you the sky is blue and the water is wet for fact throughout life yet you will deflect and come up with some sort of notion to contradict these facts just for the sake of contradiction.

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